1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED: June 20, 1997
BETWEEN: Protection One Alarm Monitoring, Inc.,
a Delaware corporation
0000 X.X. Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxx 00000 ("Buyer")
AND: Able Alarms of Arizona, Incorporated,
an Arizona corporation
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000 ("Company")
AND: Xxxxxxx X. Xxxx
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000 ("Stockholder")
RECITALS:
A. Stockholder is the owner of fifty percent (50%) of the issued
and outstanding shares of the capital stock (the "AAA Stock") of the Company;
and
B. Buyer desires to purchase the AAA Stock from Stockholder and
Stockholder desires to sell all such AAA Stock to Buyer, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. The following terms shall be defined as set forth
below:
1.1 Alarm Accounts. The term "Alarm Accounts" is defined as
all installed monitored alarm accounts of the Company set forth on SCHEDULE
1.1(A) for the Alarm Accounts with Contracts (the "Written Alarm Accounts") and
SCHEDULE 1.1(B) for the Alarm Accounts without Contracts (the "Oral Alarm
Accounts") to be attached at the Closing to the Closing Addendum, including all
Equipment and goodwill related thereto, all available records (including,
without limitation, service and installation records), files, computer
information, monitoring codes, upload codes, download codes, master codes,
lock-out codes, communicator identification codes and
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goodwill related thereto, and any and all Contracts and related agreements for
alarm systems and services between the Company and Subscribers.
1.2 Assets. The term "Assets" is defined as all of the Alarm
Accounts, Equipment, the Other Property, the Telephone Lines of the Company as
of the Closing, which will include all of the tangible and intangible assets of
the Company as of the Closing Date and which will not include on the Closing
Date the tangible and intangible assets of the Company listed on SCHEDULE 1.2 to
be attached at the Closing to the Closing Addendum which the Company transferred
to Stockholder or to Stockholder's designee prior to the Closing (the "Excluded
Assets").
1.3 Assumed Liabilities. The term "Assumed Liabilities" is
defined as (i) all obligations of Company to Subscribers to provide monitoring,
warranty, repair or other security services pursuant to written Contracts, as
that term is defined in Section 5.16, and the Other Contracts, as that term is
defined in Section 1.16, included in the Assets listed in Section 1.2 and all
express limited warranty obligations for alarm systems sold and installed by the
Company prior to Closing and (ii) all other liabilities set forth on SCHEDULE
1.3(A), if any, to be attached at the Closing to the Closing Addendum, which
shall set forth (a) the liabilities which will not be deducted from the Purchase
Price and (b) the liabilities which will be deducted from the Purchase Price.
The Assumed Liabilities shall not include the liabilities set forth on SCHEDULE
1.3(B) to be attached at the Closing to the Closing Addendum which the Company
transferred to Stockholder or to Stockholder's designee prior to Closing (the
"Excluded Liabilities").
1.4 Closing and Closing Date. The terms "Closing" and "Closing
Date" are defined as June 30, 1997, or such earlier date as the parties may
mutually agree upon in writing when the Closing of the purchase and sale of the
AAA Stock is consummated. The transfer to Buyer of control and the
responsibility of the Company shall be effective as of 12:01 a.m. Pacific
Daylight Savings Time on the day following the Closing Date.
1.5 Closing Value. The term "Closing Value" is defined as the
average per share closing price of Parent's shares of common stock for the ten
(10) trading days ending two (2) trading days prior to the date of this
Agreement, which is equal to Thirteen and 25/1000 Dollars ($13.025).
1.6 Deferred Payment. The term "Deferred Payment" is defined
as an amount equal to twelve percent (12%) of the QRR of the Alarm Accounts as
of the Closing Date, multiplied by a factor of thirty-nine (39), which is
subject to adjustment under Section 3, against which any Net Lost QRR, as that
term is defined in Section 3.4.2, shall be subtracted.
1.7 Environmental Laws. The term "Environmental Laws" is
defined as any and all foreign and domestic federal, state and local laws
(including case law), regulations, ordinances, rules, judgments, orders,
decrees, codes, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and governmental restrictions relating to the environment
or to
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emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes that affect human health and the environment or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
1.8 Environmental Liabilities. The term "Environmental
Liabilities" is defined as all liabilities, whether vested or unvested,
contingent or fixed, which (i) arise under or relate to Environmental Laws and
(ii) relate to actions occurring or conditions existing on or prior to the
Closing Date.
1.9 Equipment. The term "Equipment" means any and all
installations and equipment owned or leased by the Company at Subscribers'
residences or places of business with respect to the Alarm Accounts.
1.10 Guaranty Period. The term "Guaranty Period" is defined as
the nine (9) month period following the Closing Date.
1.11 Hazardous Substances. The term "Hazardous Substances" is
defined as any toxic, radioactive, caustic or otherwise hazardous substance
regulated by any Environmental Law, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any material
constituent elements displaying any of the foregoing characteristics.
1.12 Lost QRR. The term "Lost QRR" is defined as the QRR
(which was determined as of the Closing Date) for any Alarm Accounts which were
canceled because a notice of cancellation, dispute or intent not to renew had
been received by Buyer or the Company, either orally or in writing, after the
Closing Date and/or which had an accounts receivable balance at least sixty (60)
days past due at the Closing Date which receivables balance due as of the
Closing Date was not paid in full on or before the expiration of the Guaranty
Period and which had been canceled or terminated by Buyer prior to the
expiration of the Guaranty Period. Lost QRR will not include: (i) Alarm Accounts
which are canceled due to the Subscriber moving and within sixty (60) days of
cancellation either the Subscriber signs a new monitoring agreement at a new
location or a new customer signs a new monitoring agreement at Subscriber's
original location; or (ii) Alarm Accounts which cancel due to service or
monitoring problems attributable to the negligence of Buyer or the Company after
the Closing Date.
1.13 Material Adverse Effect. The term "Material Adverse
Effect" is defined as any change, effect or occurrence that has, or is
reasonably likely to have, individually or in the aggregate, a material adverse
impact on (i) the condition (financial or otherwise) or prospects of the
Company, its business or the Assets, or (ii) the operation of the business
before or after the Closing Date or the ownership or other use of the Assets by
Buyer and the Company thereafter.
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1.14 Other Property. The term "Other Property" is defined as
Stockholder's trademarks, tradenames and intellectual property rights listed in
SCHEDULE 1.14 to be attached at the Closing to the Closing Addendum.
1.15 Purchase Price and Closing Price Components. The term
"Purchase Price" is defined as an amount equal to: (i) fifty percent (50%) of
the QRR of the Alarm Accounts as of the Closing Date, multiplied by a factor of
thirty-eight (38); less (ii) the Unearned Income as of the Closing Date; and
less (c) the Assumed Liabilities, if any, described in subparagraph (b) of
SCHEDULE 1.3(A), all of which shall be subject to adjustment under Sections 3.3
and 3.4 hereof. The items comprising the "Closing Price Components" are set
forth in SCHEDULE 1.15 (the "Closing Purchase Price Schedule").
1.16 QRR. The term "QRR" is defined as the gross monthly
recurring revenue of the Written Alarm Accounts, as such term is defined herein,
under valid Contracts, as such term is defined in Section 5.16, and of the Oral
Alarm Accounts, as such term is also defined herein, under any valid contracts
the Company has in effect for the Oral Alarm Accounts (the "Other Contracts")
for the leasing, monitoring and servicing of alarm systems which are in full
force and effect as of the Closing Date, do not contain restrictions or
limitations against assignment to Buyer and which have receivable balances which
are current or no more than ninety (90) days past due. QRR is reduced by: (i)
the total monthly charge paid to third party response agencies for patrol or
alarm response; and (ii) a deduction for leased alarm accounts if ownership of
the alarm system passes to the Subscriber at the end of the lease. QRR does not
include any amounts derived from or which are expected to be derived from: (a)
services to be provided under any Contract or Other Contract which by its terms
is terminable and has been terminated by a Subscriber as a result of the
consummation of the transaction contemplated hereby; (b) services to be provided
under any Contract or Other Contract as to which verbal or written notice of
cancellation, termination or non-renewal has been received prior to the Closing;
(c) time and materials charges or any other like charges for non-recurring,
non-regular services; (d) reimbursement for or prepayment of leased telephone
line charges associated with the Alarm Accounts; (e) reimbursement for or
prepayment of any false alarm assessments; and (f) reimbursement for or
prepayment of any taxes, fees, increased monitoring charges or other charges
imposed by any governmental authority with respect to the furnishing of alarm
services. Quarterly, semi-annual and annual xxxxxxxx shall be divided by three
(3), six (6) and twelve (12), respectively, to determine the monthly recurring
revenue amount.
1.17 Replacement Accounts. The term "Replacement Accounts"
means a monitored alarm contract, including all leased equipment related
thereto, and any and all related agreements for leasing, installation,
maintenance, servicing and/or monitoring of alarm systems owned by Stockholder
or JK Alarms of Arizona, Inc. after the Closing Date which is used to replace
Lost QRR under Section 3.4.3 of this Agreement. As of the date of transfer of
each Replacement Account to Buyer or the Company, all terms, conditions and
representations applicable to the Alarm Accounts shall apply in all material
respects to each Replacement Account.
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1.18 Subscriber. The term "Subscriber" is defined as any
person, business, corporation or other entity that has an Alarm Account with the
Company for the provision of alarm and monitoring services.
1.19 Taxes. The term "Taxes" is defined as any and all
federal, state, local, foreign or other taxes (including all those related to
income, gross receipts, franchise, excise, sales and use, social security,
unemployment, workers' compensation, ad valorem and property taxes).
1.20 Telephone Lines. The term "Telephone Lines" is defined as
the Company's interest in all of the telephone lines, voice service lines, call
back lines and numbers on which the Alarm Accounts are being monitored or which
are otherwise used or owned by the Company in connection with the business. All
of the telephone numbers for the Telephone Lines shall be listed in SCHEDULE
1.20 to be attached at the Closing to the Closing Addendum.
1.21 Unearned Income. The term "Unearned Income" is defined
as: (i) all accounts receivable billed by the Company for services to be
rendered on or after the Closing to the Alarm Accounts by Buyer; and (ii)
payments and deposits received by the Company prior to the Closing, for services
to be rendered on or after the Closing to the Alarm Accounts by Buyer.
2. Agreement to Purchase and Sell AAA Stock. In reliance upon the
warranties, representations and covenants of Stockholder contained in this
Agreement, and subject to the provisions in this Agreement, Buyer agrees to
purchase from Stockholder at the Closing all of the issued and outstanding
shares of the AAA Stock of the Company of which Stockholder is the owner and
holder. In reliance on the warranties, representations and covenants of Buyer
contained in this Agreement, and subject to the provisions in this Agreement,
Stockholder agrees to sell to Buyer at the Closing all of the AAA Stock of which
Stockholder is the owner and holder.
3. Purchase Price and Adjustments to Purchase Price.
3.1 Payment of the Purchase Price. The Purchase Price shall be
paid to Stockholder as follows:
3.1.1 Closing Payment. On the Closing Date, Buyer shall
pay to Stockholder the following:
(a) An amount equal to sixty percent (60%) of the
Purchase Price, less the Deferred Payment, by check or wire transfer to
Stockholder; and
(b) An amount equal to forty percent (40%) of the
Purchase Price by delivering to Stockholder stock certificates for shares of
common stock of Protection One, Inc., par value $.01 per share (the "Pro One
Stock"), the number of shares of which shall equal forty percent (40%) of the
Purchase Price divided by the Closing Value (the amounts payable pursuant
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to subsections (a) and (b) are collectively referred to herein as the "Closing
Payment"). Rather than issue fractional shares of Pro One Stock, Buyer will pay
in cash the amount of any fractional shares of Pro One Stock to which
Stockholder would be entitled.
3.1.2 Deferred Payment. Buyer shall pay the Deferred
Payment to Stockholder within ninety (90) days after the end of the Guaranty
Period, subject to adjustment in accordance with Sections 3.3 and 3.4.
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3.2 Registration of Pro One Stock.
3.2.1 Registration Statement. Prior to the Closing Date,
Buyer shall cause Protection One, Inc. (the "Parent") to file a Registration
Statement on Form S-3 registering the offer and sale by Stockholder from time to
time of the Pro One Stock delivered to Stockholder under this Agreement. To
evidence the obligation of Parent to register the Pro One Stock, Parent and
Stockholder shall enter into a Registration Rights Agreement concurrently
herewith defining their respective rights and responsibilities with respect to
the Pro One Stock and Stockholder shall execute and deliver to Buyer an
affidavit verifying the status of Stockholder as an "accredited investor" within
the meaning of Rule 501(a)(1) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, a copy of the
forms of which are attached hereto as SCHEDULE 12.12 and by this reference
incorporated herein.
3.2.2 Exchange of Pro One Stock. If for any reason the
Registration Statement filed by Parent does not become effective on or before
July 31, 1997, Stockholder may tender to Buyer the stock certificates for the
Pro One Stock delivered by Buyer to Stockholder pursuant to Section 3.1.1(b) and
Buyer, upon receipt of such stock certificates, shall pay to Stockholder an
amount equal to forty percent (40%) of the Purchase Price, less any amounts paid
at the Closing for any fractional shares of Pro One Stock to which Stockholder
would be entitled, by check or wire transfer to Stockholder.
3.3 Purchase Price Adjustments. The Purchase Price, including
the Closing Payment and Deferred Payment, shall be subject to adjustments as
follows:
3.3.1 Final Purchase Price Schedule. Within one hundred
twenty (120) days after the Closing Date, Buyer will prepare and deliver to
Stockholder a schedule (the "Final Purchase Price Schedule"), setting forth any
adjustments to the Purchase Price based upon any changes, differences or
discrepancies in the Closing Price Components as scheduled or represented herein
as of the Closing Date. If Stockholder disagrees with any adjustments shown on
the Final Purchase Price Schedule, the Stockholder shall notify Buyer within
fourteen (14) days of receipt of the Final Purchase Price Schedule by a written
notice setting forth the basis for the disagreement. Any differences regarding
the Final Purchase Price Schedule not resolved with one hundred fifty (150) days
after the Closing Date shall be resolved in accordance with Section 20.10.
3.3.2 Purchase Price Adjustment. In the event the Closing
Price Components set forth in the Final Purchase Price Schedule are more or less
than the Closing Price Components used to calculate the Purchase Price at
Closing, then and in such event, the Purchase Price, Closing Payment and
Deferred Payment shall be adjusted upwards or downwards accordingly. If the
Purchase Price, Closing Payment and Deferred Payment are adjusted upward as a
result in change of any changes in the Closing Price Components other than a
change in the QRR, Buyer shall, concurrently with the delivery of the Final
Purchase Price Schedule, pay to Stockholder the amount of the increase. If the
Purchase Price, Closing Payment and Deferred Payment is adjusted
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downwards as a result of a change in any of the Closing Price Components other
than the QRR, unless Stockholder notified Buyer that Stockholder disagreed with
the Final Purchase Price Schedule in accordance with Section 3.3.1, Stockholder
shall, within twenty (20) days of the receipt of the Final Purchase Price
Schedule, refund the amount of the decrease to Buyer. If the Purchase Price,
Closing Payment and Deferred Payment is adjusted upwards as a result of a change
in the QRR, Buyer shall, concurrently with the delivery of the First Purchase
Price Schedule, pay to Stockholder an amount equal to the QRR set forth on the
Final Purchase Price Schedule (the "Final QRR") less the QRR determined at
Closing (the "Closing QRR"), multiplied by a factor of thirty-nine (39) and then
multiplied by eighty-eight percent (88%), and an amount equal to the Final QRR
less the Closing QRR, multiplied by a factor of thirty-nine (39) and then
multiplied by twelve percent (12%), shall be added to the Deferred Payment. If
the Purchase Price is adjusted downward as a result of a change in the QRR,
unless Stockholder notified Buyer that Stockholder disagreed with the Final
Purchase Price Schedule in accordance with Section 3.3.1, Stockholder shall,
within twenty (20) days of receipt of the Final Purchase Price Schedule, refund
to Buyer an amount equal to the Closing QRR less the Final QRR, multiplied by a
factor of thirty-nine (39) and then multiplied by eighty-eight percent (88%),
and the Deferred Payment shall be decreased by an amount equal to the Closing
QRR less the Final QRR, multiplied by a factor of thirty-nine (39) and then
multiplied by twelve percent (12%). If Stockholder notified Buyer that
Stockholder disagreed with the Final Purchase Price Schedule, the Stockholder
shall refund any amounts to Buyer immediately upon resolution of any differences
regarding the Final Purchase Price Schedule in the manner described in Section
3.3.1. If there are increases and decreases in the Purchase Price, they shall be
offset against each other in determining the net amount to be paid.
3.4 QRR Guaranty.
3.4.1 Guaranty Period and QRR Guaranty. Stockholder
hereby guarantees the QRR of the Alarm Accounts for the term of the Guaranty
Period, subject to the terms and provisions contained in this Section 3.4 (the
"QRR Guaranty").
3.4.2 Calculation of QRR Guaranty Payment. Within sixty
(60) days after the end of the Guaranty Period, Buyer shall determine the Net
Lost QRR by subtracting the QRR of Replacement Accounts from all Lost QRR. The
Purchase Price and Deferred Payment shall be reduced if the Net Lost QRR is less
than ninety-eight percent (98%) of the Lost QRR, in which case the balance of
the Purchase Price and the Deferred Payment due to Stockholder shall be reduced
by an amount equal to ninety-eight percent (98%) of the Lost QRR less the Net
Lost QRR multiplied by a factor of thirty-nine (39) (the "QRR Guaranty
Payment"). Buyer shall prepare and deliver to Stockholder a written statement
showing the computation of the QRR Guaranty Payment.
3.4.3 Replacement Accounts. During the Guaranty Period,
Buyer shall provide to Stockholder, on or before the twentieth (20th) day of
each month, a report ("QRR Report") listing the Lost QRR ("Monthly Lost QRR")
for the previous full calendar month. If Stockholder desires to transfer
Replacement Accounts to the Company to replace Monthly Lost
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QRR, then Stockholder or JK Alarms of Arizona, Inc. must transfer such
Replacement Accounts to the Company within thirty (30) days after the date of
such monthly QRR Report and before the forty- fifth (45th) day after the end of
the Guaranty Period. The QRR for Replacement Accounts transferred to the Company
shall not exceed the Monthly Lost QRR set forth in the QRR Report dated within
thirty (30) days prior to the date of each transfer of Replacement Accounts.
Each Replacement Account must be located in Buyer's existing market areas of
Arizona, California, Colorado, Nevada, New Mexico, Oregon, Utah and Washington
or in Northwestern Idaho ("Buyer's Market"), and shall meet the representations
agreed to herein which are applicable to the Alarm Accounts, including without
limitation, the definitions of Alarm Accounts and QRR, as of the date of
transfer of the Replacement Account. Buyer will not accept as Replacement
Accounts any accounts which are subject to oral agreements or which are more
than thirty (30) days past due as of the date of transfer to Buyer. In addition,
on the date each Replacement Account is transferred to the Company, there shall
be no more than two (2) months of either free monitoring service or of prepaid
monitoring service. Each Replacement Account shall be transferred to the Company
pursuant to a form contract expressly approved by Buyer, a form utilized by
Buyer or a form substantially similar to Buyer's form contract. Upon transfer to
the Company of a Replacement Account which conforms to the requirements set
forth herein, the Replacement Account shall be deemed to be an Alarm Account,
and shall be subject to all terms, conditions, representations and warranties
set forth in this Agreement as it relates to the Alarm Accounts.
Contemporaneously with the transfer of the Replacement Account to the Company,
Stockholder shall also deliver to the Company all contracts, records,
information and documents which Buyer may reasonably require in order to take
possession and control of the Replacement Account and to provide monitoring
service. Stockholder shall execute such documents as Buyer shall reasonably
require to evidence the Company's ownership of the Replacement Accounts and the
alarm system equipment related thereto if it is owned by Stockholder. JK Alarms
of Arizona, Inc. will monitor the Replacement Accounts on one of the Telephone
Lines which will be transferred to Buyer in accordance with the Maintenance and
Monitoring Agreement attached as SCHEDULE 8.3. In the event a Replacement
Account must be reprogrammed in order to be monitored by Buyer's central
monitoring station, Stockholder shall reprogram, at its cost, each Replacement
Account within fifteen (15) days after transfer to the Company of the
Replacement Account.
3.4.4 Transfer of Lost QRR Customer Files to Stockholder.
Within twenty (20) days after the end of each month during the Guaranty Period,
Buyer will transfer to Stockholder, without recourse or warranty of any kind,
the customer files for those Subscribers whose alarm accounts have been
cancelled or terminated during the Guaranty Period and for which an adjustment
to the Deferred Payment was made. Buyer reserves the right to collect past due
charges, Buyer's customary cancellation fee and any other amounts due under the
Contracts with the Subscribers, on any terms or conditions deemed acceptable by
Buyer, in its sole discretion. Buyer makes no representations regarding the
cancelled or terminated accounts transferred to Stockholder hereunder, and
Stockholder acknowledges and agrees that Buyer shall have no liability to
Stockholder if the Subscribers of these cancelled or terminated accounts fail to
renew, reinstate or reaffirm their alarm account contracts with Stockholder.
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3.4.5 Payment of Balance of Deferred Payment. Buyer shall
pay to Stockholder ninety (90) days after the end of the Guaranty Period any
positive Deferred Payment balance (after any adjustments under Section 3.4.2)
remaining after subtracting the QRR Guaranty Payment. Any disputes regarding the
QRR Guaranty Payment and Deferred Payment shall be resolved in accordance with
Section 20.10. Stockholder shall notify Buyer of any dispute relating to the QRR
Guaranty Payment within fourteen (14) days after delivery of the schedule. If
the QRR Guaranty Payment exceeds the Deferred Payment, then Buyer shall have no
obligation to pay any of the Deferred Payment to Stockholder, and Stockholder
shall have no obligation to pay to Buyer the amount by which the QRR Guaranty
Payment exceeds the Deferred Payment.
4. Additional Schedules Delivered as of the Closing Date. In
addition to other schedules specified herein, Stockholder shall prepare and
deliver the following schedules to Buyer to be attached to the Closing Addendum
as SCHEDULES 4.1, 4.2, AND 4.3.
4.1 Schedule of Third Party Guarantees. A schedule setting
forth, in detail, all third party guarantees related to any alarm monitoring
accounts purchased by the Company, including all accounts purchased as a result
of the acquisition of the assets of third parties and all accounts which have
been separately purchased by the Company.
4.2 Schedule of Contracts and Agreements. A schedule setting
forth, in detail, all of the noncompete agreements or covenants, nonsolicitation
agreements or covenants and consulting agreements and other agreements between
the Company and third parties relating to the Company's acquisition of QRR.
4.3 Schedule of Restrictive Agreements. A schedule setting
forth, in detail, all contracts, agreements or understandings to which (a) the
Company is a party or (b) the Company is in any way bound, and which in any way
restrict or purport to restrict the Company's business whether with specified
persons or in specified areas or otherwise.
5. Representations, Warranties and Agreements of the Company and
Stockholder. Except as otherwise set forth or described on SCHEDULE 5
("Stockholder's Disclosure Schedule") or any other schedule or exhibit attached
hereto, as such SCHEDULE 5 or any other schedule or exhibit may be updated on
the Closing Date in the Closing Addendum, the Company and Stockholder agree,
represent and warrant as follows:
5.1 Corporate Status of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Arizona. The Company does not have any subsidiaries and does not own any
securities of, or have any proprietary interest in, any other entity. The
Company has full corporate power and corporate authority to own, or hold under
lease, the Assets and is qualified to conduct business in all jurisdictions
except where the failure to qualify would not materially adversely affect the
business of the Company.
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5.2 Outstanding Stock of the Company. The authorized capital
stock of the Company consists of one hundred thousand (100,000) shares of common
stock, no par value per share, of which three hundred seven and two-tenths (307
2/10) shares are issued and outstanding. All of the Company's issued and
outstanding shares of stock have been validly issued to Stockholder and to
Xxxxxxxxx Xxxxxxx, Trustee of the Xxxx Charitable Trust dated May 28, 1997 (the
"Other Stockholder"), and are fully paid and nonassessable and are not subject
to any preemptive or other similar rights. There are no accrued and unpaid
dividends on the preferred stock. Stockholder and the Other Stockholder are each
the owner, beneficially and of record, of fifty percent (50%) of the issued and
outstanding shares of the Company free and clear of all restrictions of any
kind, nature or description. The Company has not authorized or issued any
securities other than to Stockholder and to the Other Stockholder, and no
person, corporation or entity holds any option, warrant or right to purchase or
otherwise acquire any shares of capital stock of the Company. Stockholder and
the Other Stockholder have not entered into any agreement with any former
stockholder of the Company, if any, regarding the sale, transfer or disposition
of the capital stock or Assets of the Company or in any manner affecting the
capital stock or Assets of the Company.
5.3 Corporate Documentation. Stockholder has furnished, or
shall have furnished on or before the Closing Date, to Buyer with a true and
complete copy of the Company's Articles of Incorporation, certified by the
Corporation Commission of the State of Arizona, a true and complete copy of the
Company's Bylaws, certified by the Secretary of the Company, a certificate of
the Corporation Commission of the State of Arizona evidencing the due
organization and valid existence of the Company under the laws of the State of
Arizona. In addition, the Company's stock transfer records and corporate records
of the meetings of the directors and stockholders of the Company, all of which
have been delivered, or all of which will have been delivered on or before the
Closing Date, to Buyer, are true, accurate and complete and reflect all issues
and transfers of stock to date and all actions and proceedings of such bodies to
the Closing Date.
5.4 Authorization of Stockholder. This Agreement has been duly
executed and delivered by Stockholder and constitutes a valid obligation legally
binding on Stockholder and is enforceable against Stockholder in accordance with
its terms, except as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the rights of creditors and except as enforceability
may be limited by rules of law governing specific performance, injunctive relief
or other equitable remedies. The execution, delivery and performance of this
Agreement by Stockholder and the consummation of the transactions contemplated
hereby by Stockholder do not and will not conflict with, or result in a breach,
default, violation or loss of a material benefit under any agreement, mortgage,
lease, license or other instrument or obligation of Stockholder or the Company
in connection with the operation of the Company's business or any of the Assets;
do not require the consent or permission of any person or governmental agency;
and will not violate any law, rule or regulation of any agency or governmental
body to which Stockholder or the Company is subject and that is individually or
in the aggregate material to the transactions contemplated hereby. No
registration, declaration or filing
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with any governmental or administrative authority is required on the part of
Stockholder or the Company in connection with the execution, delivery and
performance of this Agreement.
5.5 Title to Stock. Stockholder has good and valid title to
the AAA Stock, free and clear of all liens, claims, charges or other
encumbrances, with full lawful right, power,
capacity and authority to sell, assign, transfer and deliver the certificates
for the AAA Stock to Buyer pursuant to this Agreement and to consummate the
transactions contemplated hereby, and there are no agreements, arrangements or
understandings restricting or otherwise relating to the transfer or voting of
the AAA Stock. At the Closing, Buyer will receive good and valid title to the
AAA Stock, free and clear of all liens, claims, charges or other encumbrances of
any nature whatsoever.
5.6 Assets. The schedules describing or listing the Assets
are, or will be on the Closing Date, true, accurate and complete and sets forth,
and will set forth on the Closing Date, a complete and an accurate listing of
all of the material intangible and tangible operating assets of the Company. The
only material tangible and intangible operating assets of the Company are the
Assets.
5.7 Excluded Assets. All of the Company's right, title and
interest in the Excluded Assets have been assigned, or will have been assigned
on or before the Closing Date, to Stockholder or his designee, and Stockholder
or his designee has acknowledged, or will have acknowledged on or before the
Closing Date, receipt of such assets.
5.8 Assumed Liabilities. SCHEDULE 1.3(A) is, or will be as of
the Closing Date, true, accurate and complete and, together with the other
Assumed Liabilities described in Section 1.3, sets forth, or will set forth as
of the Closing Date, a complete and an accurate listing of all accrued, absolute
and contingent liabilities of the Company as of the Closing Date. The Company
has no obligations, indebtedness or liabilities, contingent or otherwise, other
than (i) those expressly described or listed in the schedules hereto; and (ii)
immaterial obligations, indebtedness or liabilities arising in the ordinary
course of business and not required by generally accepted accounting principles
to be recorded in financial statements or notes thereto.
5.9 Excluded Liabilities. All of the Excluded Liabilities have
been assumed, or will have been assumed as of the Closing Date, by Stockholder
or his designee, and the Company has been released, or will have been released
on or before the Closing Date, in writing from any liability therefrom.
5.10 Financial Statements. Stockholder has heretofore
delivered to Buyer a copy of the Company's financial statements dated as of May
31, 1997 ("Financial Statements"), a copy of which is included in SCHEDULE 5.
The Financial Statements include, among other things, a balance sheet of the
Company dated as of May 31, 1997, and the related internal statement of income
and retained earnings for the period ended May 31, 1997. To the best of the
Company's and Stockholder's best knowledge, the Financial Statements fairly
present the financial position, results
Page 12 STOCK PURCHASE AGREEMENT
13
of the operations and the changes in financial position of the Company for the
periods indicated were accurately prepared from the books and records of the
Company in accordance with the accounting policies then in effect and have been
prepared on a consistent basis with past periods, all subject to year-end
adjustment, which adjustment in the aggregate shall not materially affect the
results contained therein.
5.10.1 Changes in Business. Except as expressly allowed or
contemplated by this Agreement, since the date of the Financial Statements, the
Company has conducted its business in the ordinary course and there has not
occurred:
(i) Any Material Adverse Effect with respect to the
Company;
(ii) Any amendments or changes in the Company's
Articles of Incorporation or Bylaws;
(iii) Any redemption, repurchase or other
acquisition of shares of capital stock of the Company or any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the capital stock of the Company;
(iv) Any increase in or modification of the
compensation or benefits payable or to become payable by the Company to any of
its directors, employees or consultants, except in the ordinary course of
business consistent with past practice, which past practice has been previously
disclosed in writing to Buyer;
(v) Any acquisition, sale or disposition of
property or assets by or of the Company, except in the ordinary course of
business;
(vi) Any entry into, amendment of, relinquishment,
termination or nonrenewal by the Company of any Contracts, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business; or
(vii) Any agreement or arrangement made by the
Company to take any action after the date hereof which, if taken prior to the
date hereof, would have made any representation or warranty set forth in this
Section 5.10 untrue or incorrect as of the date hereof.
5.10.2 Undisclosed Liabilities. To the best knowledge of
Stockholder, there are no liabilities or obligations of any nature of the
Company, due or to become due, determined or determinable, absolute, accrued,
contingent or otherwise, and there are no conditions, situations or
circumstances that have existed, are existing or that could reasonably be
expected to result in any such liabilities or obligations, except, in any such
event, (i) as, and to the extent, set
Page 13 STOCK PURCHASE AGREEMENT
14
forth or specifically reserved against on the Financial Statements, (ii)
liabilities incurred since the date of the Financial Statements in the ordinary
and usual course of business consistent with past practice (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort or
infringement claim, violation of law or lawsuit) and (iii) liabilities incurred
in connection with or contemplated by this Agreement or listed in the schedules
attached hereto.
5.11 Taxes and Tax Filings. The Company has duly and timely
filed when due, or will have timely filed on or before the Closing Date, all
returns, reports, declarations and applications ("Returns"), relating to all
Taxes required to be filed by the Company (including, without limitation, with
respect to estimated Taxes, excise Taxes and informational returns) relating to
periods through the Closing Date. All such Returns filed before the Closing Date
were, when filed, true, accurate and complete and reflect all Taxes payable by
the Company. The Company has paid or, if payment is not yet due, has established
adequate reserves for the payment of all Taxes, assessments, deficiencies,
levies, duties, license fees, registration fees, withholdings and all similar
governmental charges for periods through the Closing Date, and any interest,
penalties or additions to tax imposed thereon in each case, whether disputed or
not and whether due or claimed to be due by any taxing authority from the
Company.
No Return required to be filed by the Company has been audited
by any taxing authority. There is no action, suit, proceeding, audit,
investigation or claim pending or threatened in respect of any Taxes for which
the Company is or may become liable, nor has any deficiency or claim for any
Taxes been imposed or assessed. There are no outstanding notices of
deficiencies, adjustments, changes in assessments, or, to the best knowledge of
the Stockholder, increases in tax rates with respect to any Taxes. The Company
has not waived any statute of limitations with respect to any taxable year.
There is no agreement, waiver or consent providing for an extension of time with
respect to the assessment of any Taxes against the Company.
The Company has timely paid, withheld or otherwise collected,
or made provision on its books for all Taxes due and payable with respect to all
taxable periods ending on or prior to the Closing Date and for the relevant
portion (ending on the Closing Date) of any taxable period beginning prior to
the Closing Date and ending after the Closing Date. There are no liens for Taxes
upon the Assets of the Company, except liens for current Taxes not yet due.
To the best of Stockholder's knowledge, the Company will not
be required to include any adjustment in taxable income for any Tax period (or
portion thereof) ending after the Closing Date pursuant to Section 481(c) of the
Internal Revenue Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for any Tax period
(or portion thereof) ending on or before the Closing Date or pursuant to the
provisions of any agreement entered into with any taxing authority with regard
to the Tax liability of the Company for any Tax period (or portion thereof)
ending on or before the Closing Date.
Page 14 STOCK PURCHASE AGREEMENT
15
The Company is not and has not been a member of an affiliated
group parent, or filed or been included in a combined, consolidated or unitary
Tax return or participated in any other similar arrangement whereby any income,
revenues, receipts, gains, losses, deductions, credits or other Tax items of the
Company was determined or taken into account for Tax purposes with reference to
or in conjunction with any such items of any other person.
The Company is not currently under any contractual obligation
to pay the income or franchise tax obligations of, or with respect to
transactions relating to, any other person or to indemnify any other person with
respect to any income or franchise tax. The Company has not signed any letter or
entered into any agreement or arrangement in writing consenting to the surrender
or sharing of any deductions, credits, or other Tax attributes with any other
person or transferred or assigned to any other person for Tax purposes any such
item.
5.12 Title. The Company has good and marketable title to the
Assets, free and clear of all security interests, liens, claims or encumbrances
of any nature or kind whatsoever, except for the Assumed Liabilities disclosed
to Buyer. All Assets located on the premises of Subscribers of the Company may,
at the option of the Company, be removed from or abandoned on such premises upon
the termination of service to such customer.
5.13 No FM Deficiencies. The Company's Alarm Accounts have
been monitored at Company's central station located at 0000 X. Xxxxxx Xxxxxx
Xxxx, Xxxxxxx, Xxxxxxx, which has been approved and listed by Factory Mutual
Research Corporation ("FM"), and is not subject to any deficiencies with respect
thereto. All required fire inspections with respect to each fire alarm system
installed at the premises of the Company's Subscribers have been performed as
required by all applicable governmental authorities.
5.14 Employees. The Company does not have any obligation
contingent or otherwise, under, nor any commitment or agreement to enter into
and no officer, director or employee is covered by any employment agreement; the
Company is not a party or otherwise subject to any collective bargaining or
other agreement governing the wages, hours and terms of employment of the
Company's employees, is not subject to any actual or threatened with any labor
dispute or labor trouble involving employees of the Company, and is not subject
to any actual or threatened demand by its employees for a collective bargaining
agreement or recognition by any labor organization, labor grievance proceeding,
controversy with any labor or employee organization, or claim or proceeding with
any employee or union under any labor law, including but not limited to equal
opportunity law or occupational safety and health law; the Company does not have
any employment contract or arrangement (including any union agreement) providing
for future compensation, written or oral, with any officer, consultant, director
or employee which is not terminable by the Company on an "at will" basis without
penalty or obligation to make payments related to such termination; and the
Company is not a party to any plan, contract or arrangement with any officer,
consultant, director or employee, written or oral, providing for bonuses,
pensions, deferred compensation, severance pay or benefits, retirement payments,
profit sharing, or the like
Page 15 STOCK PURCHASE AGREEMENT
16
to be paid after the Closing Date. All employees of the Company will be
terminated effective as of June 30, 1997, and all amounts due and owing to the
employees through and including June 30, 1997, will have been paid in full,
including without limitation, all wages, salaries, payroll taxes, bonuses,
severance and employer contributions to any pension or retirement plan.
Stockholder has provided Buyer with a complete and accurate copy of all of the
Company's employee manuals, benefits and policies.
Page 16 STOCK PURCHASE AGREEMENT
17
5.15 Benefit Plans.
5.15.1 Employee Benefit Plans. Each "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and each employment agreement, compensation
agreement, bonus, commission or similar arrangement, and fringe benefit
arrangement which is maintained, administered or contributed to by the Company
or any of its affiliates (as defined below) and covers any employee or former
employee of the Company or any affiliate or under which the Company or any
affiliate has any liability shall be identified on SCHEDULE 5 as updated on the
Closing Date in the Closing Addendum. Copies (or, if not in writing, detailed
summaries) of such plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof have been furnished, or
shall have been furnished on or before the Closing Date, to Buyer together with
(to the extent existing) (a) the most recent annual report prepared in
connection with any such plan and (b) the most recent actuarial valuation report
prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans." For purposes of this Section 5.17
only, an "affiliate" of any person or entity means any other person or entity,
which, together with such person or entity, would be treated as a single
employer under Section 414 of the Internal Revenue Code (the "Code") or Title IV
of ERISA. The only Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2) of
ERISA are identified as such in Exhibit 2.10(a).
5.15.2 Multiemployer Plans. No Employee Plan constitutes
a "multiemployer plan" as defined in Section 3(37) of ERISA (a "Multiemployer
Plan"), no Employee Plan is maintained in connection with any trust described in
Section 501(c)(9) of the Code and no Employee Plan is subject to Title IV of
ERISA or Section 412 of the Code. If the Company or any of its affiliates ever
maintained or was obligated to contribute to a Multiemployer Plan or a plan
subject to Title IV of ERISA or Section 412 of the Code, any withdrawal or other
liability under Title IV of ERISA with respect to such plan has been fully
satisfied. Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Employee Plan has or will make the
Company or any officer or director thereof, subject to any liability under Title
I of ERISA or liable for any tax pursuant to Section 4975 of the Code.
5.15.3 Qualification of Employee Plan. Each Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to date,
and each trust forming a part thereof is exempt from tax pursuant to Section
501(a) of the Code. The Company has furnished, or shall have been furnished on
or before the Closing Date, to Buyer copies of the most recent Internal Revenue
Service determination letters, if any, with respect to each such Employee Plan.
Each Employee Plan has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Employee Plan.
Page 17 STOCK PURCHASE AGREEMENT
18
5.15.4 Effect of this Agreement. There is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Company or any affiliate that would, as a result of the consummation of the
transactions contemplated by this Agreement, (a) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of the
Company from the Company, under any Employee Plan or otherwise, (b) materially
increase any benefits otherwise payable under any Employee Plan, (c) result in
the acceleration of the time of payment or vesting of any such benefits or (d)
otherwise obligate the Company or any affiliate to pay any additional
compensation, including severance pay, that would not be deductible pursuant to
the terms of Sections 162(a)(1) or 280G of the Code.
5.15.5 Post Retirement Benefits. Neither the Company nor
any of its affiliates maintain or administer any "defined benefit plans" for the
benefit of their employees. Neither the Company nor its affiliates have any
projected liability in respect of post retirement health, life and medical
benefits for retired employees of the Company or its affiliates, other than any
liability to provide benefits under Title I, Part 6 of ERISA, if any. Other than
provisions of applicable law, to the best knowledge of Stockholder, no condition
exists that would prevent the Company from amending or terminating any
applicable Employee Plan.
5.15.6 Plan Maintenance Expenses. Other than any increase
in premiums imposed by the insurer under an employee welfare benefit plan (as
defined in ERISA Section3(1)), there has been no amendment to, written
interpretation or announcement (whether or not written) by the Company or any of
its affiliates relating to, or change in employee participation or coverage
under, any Employee Plan which would materially increase the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year.
5.16 Form Contracts. Included in SCHEDULE 5 is a true and
correct copy of each type of form contract the Company has in effect with its
Subscribers for alarm leases, alarm monitoring and other alarm services (the
"Contracts"). The Company has not modified, except in a writing disclosed to
Buyer, any of the Contracts and, except for the Other Contracts, has not
undertaken any obligations or made any warranties or guarantees to any
Subscribers other than those set forth in the Contracts. The Company has not
entered into any other type of service or lease contract with its Subscribers
nor is the Company rendering services to any of its Subscribers other than
pursuant to either a Contract or an Other Contract. To the best of the Company's
and Stockholder's knowledge, each Contract which the Company has with its
current Subscribers is fully executed, valid, in full force and effect and
enforceable in accordance with its terms. To the best of the Company's and
Stockholder's knowledge, each Other Contract which the Company has with its
current Subscribers is valid, in full force and effect and enforceable in
accordance with its terms. The Company is not, and on the Closing Date will not
be, in default or material violation of any contracts with its Subscribers
(whether pursuant to a Contract or an Other Contract). On the Closing Date, the
Company shall have possession of all original monitoring and lease contracts
(except for
Page 18 STOCK PURCHASE AGREEMENT
19
Subscribers with Other Contracts) with Subscribers and/or such other documents
and information which Buyer will need and may reasonably require to perform
monitoring, repair, servicing and other alarm services requested by Subscribers
or required to be provided to the Subscribers with Contracts and to the
Subscribers without Contracts. Notwithstanding the foregoing, after the Closing,
Stockholder shall not be required to resign any Alarm Account to a new
monitoring contract or to require any Subscriber with an Other Contract to
execute a monitoring contract.
5.17 Employee Entitlements. Stockholder has provided, or shall
have been provided on or before the Closing Date, to Buyer with a copy of the
Company's latest Payroll Register, the employee's name, whether such employee
holds any state-issued licenses in connection with his/her employment, hire-in
date, position, current salary and accrued vacation entitlements. Except as set
forth in the employee information provided to Buyer, no bonuses, severance,
medical expense reimbursement, additional compensation (other than salary or
wage increases in the ordinary course of business) or other like benefits were
paid or are payable to any employees during the period from the date of such
employee information provided to Buyer to the Closing Date, or are payable to
any such employees in respect of any other periods ending on, prior or
subsequent to the Closing Date. The Company has, with respect to the hiring of
any employee, performed such actions including investigations of such employee
an may be required by applicable federal, state or local laws, ordinances or
regulations.
5.18 Increase in Fees. Since January 1, 1997, the Company
neither has increased recurring monitoring charges or service charges payable by
the Company's retail Subscribers, other than for additions or changes in
services or protection.
5.19 No Defaults. To the best of the Company's and
Stockholder's knowledge, the Company is not in default or alleged to be in
default under any material agreement, license or obligation relating to the
Assets and/or Assumed Liabilities. Except for delinquent payments by some of its
Subscribers, no other party to any such agreement, license or obligation is in
default thereunder and there exists no condition or event which, after notice or
lapse of time or both, would constitute a default by any party to any such
agreement, license or obligation.
5.20 License and Permits. The Company and its employees have
all material governmental licenses and permits (federal, state and local)
necessary for the conduct of the business as now carried on by the Company, and
such licenses are in full force and effect. Copies of all of the Company's
licenses shall be included in SCHEDULE 5 as updated on the Closing Date in the
Closing Addendum. No violations are or have been recorded and Stockholder is not
aware of any unrecorded violations in respect of any such licenses or permits of
the Company and no proceedings are pending or to Stockholder's knowledge
threatened concerning the revocation or limitation of any such license or permit
of the Company.
5.21 Environmental Compliance. The Company has never received
any written notice, demand, citation, summons, complaint or order or any written
notice of any penalty,
Page 19 STOCK PURCHASE AGREEMENT
20
lien or assessment and, to the best of Stockholder's knowledge, no investigation
or review is pending by any governmental entity, with respect to any (i) alleged
material violation by the Company of any Environmental Law; or (ii) alleged
material failure by the Company to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with the
conduct of their business. To the best of Stockholder's knowledge, the Company
has no Environmental Liabilities and the Company has never had a material
release of Hazardous Substances into the environment in violation of any
Environmental Law or environmental permit. The Company has delivered, or shall
have been delivered on or before the Closing Date, to Buyer copies of all
environmental audits and other similar reports which have been prepared by or
for the Company with respect to its owned or leased real property. The Company
does not own, lease or otherwise have any obligations with respect to or
responsibility for any underground fuel storage tanks or facilities and has not
and does not transport or store Hazardous Substances.
5.22 Compliance With Laws. To the best of the Company's and
Stockholder's knowledge, the Company has complied with all material requirements
of laws, rules, regulations and orders applicable to the operation of the
business conducted by the Company. The Company has not received notice of any
action nor taken any action or failed to take any action which action or failure
will or would, in any way, preclude or prevent Buyer and the Company from using
the Assets after the Closing in the same manner as theretofore used by the
Company. To the best of the Company's and Stockholder's knowledge, none of the
real property leased by the Company, or the occupation thereof, is in violation
of any material requirement of any law, building code, zoning or other
authority, code or regulation applicable thereto and no notice from any
governmental body has been served upon Stockholder or the Company claiming any
violation of any such law, ordinance, codes or regulation or requiring or
calling attention to the need for any work, repair, construction, alteration or
installation or in connection with said properties which has not been complied
with or settled. None of the real property under lease is subject to any pending
zoning hearing or proceedings.
5.23 Litigation. There are no claims, litigation, proceedings
or investigations pending or to Stockholder's knowledge, threatened against the
Company. A list of all the incidents in the past two years where a customer or
third party alleged damages in excess of One Thousand Dollars ($1,000), which is
alleged to result from a failure of an alarm system or the Company's service,
and whether the Company has reported such incident to its insurance carrier
shall be including on SCHEDULE 5 as updated on the Closing Date in the Closing
Addendum. No insurance carrier, which has had any such incident reported to it,
has made a reservation of rights or denial of coverage with respect to such
incident.
5.24 Brokers. Stockholder has not employed any broker, finder
or agent or dealt with anyone purporting to act in such capacity or agreed to
pay any brokerage fee, finder's fee or commission in connection with the
transactions contemplated by this Agreement.
Page 20 STOCK PURCHASE AGREEMENT
21
5.25 Insurance. The Company has in full force and effect the
policies of automobile liability insurance and commercial general liability
insurance ("Liability Insurance"). A copy of such Liability Insurance policies
shall be included in SCHEDULE 5 as updated on the Closing Date in the Closing
Addendum. All of the Contracts are covered by the Company's Liability Insurance
coverage for negligence claims. The Company has had similar Liability Insurance
in full force and effect, without interruption, for the life of the Company. To
the best of the Company's and Stockholder's knowledge, the Company in not in
default, and no event has occurred (or failed to occur) that, with the passing
of time or the giving of notice or both would constitute a default by the
Company under any such policy of insurance, or would entitle the insurer under
such insurance to deny coverage of any claim against the Company.
5.26 Restrictive Agreements. Stockholder has provided, or will
have provided as of the Closing Date, to Buyer with a complete set of all
contracts, agreements or understandings ("Restrictive Agreements") to which (i)
the Company is a party or (ii) the Company is in any way bound and which in any
way restrict or purport to restrict the Company's business or competition
whether with specified persons or specified areas or otherwise. None of the
Restrictive Agreements have been modified or changed and none of the rights of
the Company therein have been waived. Stockholder is not aware of any
unauthorized use or breach of contract by any third parties in connection with
any customer lists or other proprietary information included in any account or
asset acquisition by the Company.
5.27 Material Documents of the Company. A list identifying all
material contracts (1), licenses, authorizations and applications therefore
relating to, or affecting, and in which the Company is a party, which are not
elsewhere described herein (excluding any such items set forth in SCHEDULE 1.2),
including, without limiting the generality of the foregoing, any and all
agreements whereby the Company acquired the operations, stock, or substantially
all of the assets and/or accounts of any other alarm company shall be included
in SCHEDULE 5 as updated on the Closing Date in the Closing Addendum. In
addition, SCHEDULE 5, as updated, shall have indicated, with respect to any
agreements, licenses, authorizations, applications or other similar documents
included in the Assets or Assumed Liabilities and listed on any other schedule
to this Agreement, those which, in the absence of specific waiver, consent,
modification, renewal, replacement or other action, may, upon or as a result of
the consummation of this Agreement and the purchase and sale of the AAA Stock
pursuant hereto, terminate, expire, be modified, be subject to termination by a
party other than the Company or in any respect not remain in full force and
effect or be breached by the Company. Stockholder is not aware of any facts that
would lead a reasonable person to believe that a third party intends to cancel
its contract or contracts with the Company or that a third party is entitled to
terminate any such contract. The Company does not have any warranty obligations
under any of its contracts or accounts, except customary warranties given in the
ordinary course of business and set forth in the Contracts.
--------------------
(1) A material contract is any contract or commitment (i) not made in the
ordinary course of the Company's business or (ii) which commits the Company to
spend more than $1,000.00 from the date hereof and which is not cancelable at
the Company's discretion without penalty to the Company.
Page 21 STOCK PURCHASE AGREEMENT
22
5.28 Monitoring. All of the Alarm Accounts are monitored on
Telephone Lines which are owned and controlled by the Company.
5.29 Alarm Systems and Equipment. All of the alarm systems in
which the protective devices are owned by the Company are in good working order
and condition, ordinary wear and tear, routine service needs and Subscriber
misuse or non-use excepted, and such alarm system equipment has been installed
in accordance with good workmanlike practices prevailing in the industry at the
time of installation. All alarm systems and equipment of the Company conform in
all material respects to the Contract pursuant to which it was installed and
comply with all material applicable laws, rules, regulations and codes at the
time of its installation.
5.30 Location of Alarm Account Subscribers. All of the Alarm
Account Subscribers are located in Buyer's Market.
5.31 Accredited Investor Status. Stockholder is an "accredited
investor" within the meaning of Rule 501(d)(1) of Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
5.32 Schedules Delivered at Execution. To the best of the
Company's and Stockholder's knowledge, all of the schedules described in this
Agreement and prepared by the Company and Stockholder which are being delivered
to Buyer upon execution hereof are true, accurate and complete in all material
respects as of the date hereof and have been prepared in conformity with the
provisions of this Agreement.
5.33 No Material Misstatements. To the best of the Company's
and Stockholder's knowledge, no representation or warranty by Stockholder
contained in this Agreement, or in any exhibit or schedule attached hereto,
contains, or will contain, any untrue statement of a material fact or omits, or
will omit, to state a material fact necessary to make the statements contained
herein or therein not misleading.
6. Representations, Warranties and Agreements of Buyer. Except as
set forth on SCHEDULE 6 ("Buyer's Disclosure Schedule"), Buyer agrees,
represents and warrants as follows:
6.1 Corporate Status of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer is qualified to conduct business in the State of Arizona as a
foreign corporation. Buyer has full corporate power and corporate authority to
purchase and acquire the AAA Stock as herein provided.
Page 22 STOCK PURCHASE AGREEMENT
23
6.2 Authorization of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid obligation legally
binding on Buyer and is enforceable against Buyer in accordance with its terms,
except as enforceability may be limited or affected by applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the rights of creditors and except as enforceability may be limited by
rules of law governing specific performance, injunctive relief or other
equitable remedies. No registration, declaration or filing with any governmental
or administrative authority is required on the part of Buyer in connection with
the execution, delivery and performance of this Agreement.
6.3 Litigation. There are no claims, litigation, proceedings
or investigations pending or, to the best knowledge of Buyer, threatened against
Buyer which would have a material adverse impact on Buyer's ability to perform
all of its duties and obligations under this Agreement.
6.4 Brokers. Buyer has not employed any broker, finder or
agent or dealt with anyone purporting to act in such capacity or agreed to pay
any brokerage fee, finder's fee or commission in connection with the
transactions contemplated by this Agreement.
6.5 Investment Intent. Buyer is acquiring the AAA Stock for
its own account and not with a view to any public resale or distribution. Buyer
is an "accredited investor" as such term is defined in Regulation D under the
Securities Act of 1933, as amended ("Securities Act"). Buyer acknowledges that
the AAA Stock has not been registered under the Securities Act or registered or
qualified under the securities laws of any state and may not be offered, sold,
pledged, hypothecated or otherwise transferred unless so registered or qualified
or unless an exemption from the registration requirements under the Securities
Act and any applicable state securities laws is available.
7. Covenants and Agreements of the Company and Stockholder
Pending the Closing. The Company and Stockholder covenant and agree as follows:
7.1 Access. Until the earlier of the Closing and the rightful
abandonment or termination of this Agreement pursuant to Section 15 or otherwise
(the "Release Time"), the Company will afford, and Stockholder will cause the
Company to afford, the officers, employees, counsel, agents, investment bankers,
accountants and other representatives of the Buyer and lenders, investors and
prospective lenders and investors free and full access to the plants,
properties, books and records of the Company, will permit them to make extracts
from and copies of such books and records, and will from time to time furnish
Buyer with additional financial and operating data and other information as to
the financial condition, results of operations, businesses, properties, assets,
liabilities or future prospects of the Company as Buyer from time to time may
request.
7.2 Conduct of Business. Until the Release Time, the Company
will, and Stockholder will cause the Company to, conducts its affairs so that at
the Closing no representation
Page 23 STOCK PURCHASE AGREEMENT
24
or warranty of the Company or Stockholder will be inaccurate, no covenant or
agreement of the Company or Stockholder will be breached, and no condition in
this Agreement will remain unfulfilled by reason of the actions or omissions of
the Company or Stockholder. Except as otherwise requested by the Buyer in
writing, until the Closing, the Company and Stockholder will cause the Company
to use its best efforts to preserve the business operations of the Company
intact to preserve in full force and effect the contracts and to preserve the
goodwill of their suppliers, customers and others having business relations with
it. Until the Closing, the Company will, and Stockholder will cause the Company
to, conduct their business and operations in all respects only in the ordinary
course.
7.3 Advice of Changes. Until the Release Time, the Company and
Stockholder will immediately advise the Buyer in a detailed written notice of
any fact or occurrence or any pending or threatened occurrence of which any of
them obtains knowledge and which (if existing and known at the date of the
execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement or a schedule hereto, which (if
existing and known at any time prior to or at the Closing) would make the
performance by any party of a covenant contained in this Agreement impossible or
make such performance materially more difficult than in the absence of such fact
or occurrence, or which (if existing and known at the time of the Closing) would
cause a condition to any party's obligations under this Agreement not to be
fully satisfied.
7.4 Confidentiality. The Company and Stockholder shall insure
that all confidential information which the Company, any of their respective
officers, directors, employees, counsel, agents, investment bankers or
accountants, or Stockholder or any of his counsel, agents, investment bankers or
accountants may now possess or may hereafter create or obtain relating to the
financial condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company, Buyer or any affiliate of any of
them, or any customer or supplier of any of them or any such affiliate shall not
be published, disclosed or made accessible by any of them, except pending the
Closing in the business and for the benefit of the Company, in each case without
the prior written consent of Buyer; provided, however, that the restrictions of
this sentence shall not apply (a) with respect to the obligations of the Company
after the Closing takes place, (b) with respect to the obligations of all such
persons and entities after this Agreement is rightfully terminated, but only to
the extent confidential information relates to the financial condition, results
of operations, business, properties, assets, liabilities or future prospect of
the Company, of any affiliate of it or (insofar as such confidential information
was obtained directly by the Company or any such affiliate from any customer or
supplier of if) of any such customer or supplier, (c) as may otherwise be
required by law, (d) as may be necessary or appropriate in connection with the
enforcement of this Agreement, or (e) to the extent the information shall have
otherwise become publicly available. The Company and Stockholder shall, and
shall cause all other such persons and entities to, deliver to Buyer all
tangible evidence of the confidential information to which the restrictions of
the foregoing sentence apply at the Closing or the earlier rightful termination
of this Agreement.
Page 24 STOCK PURCHASE AGREEMENT
25
7.5 Public Statements. Before the Company or Stockholder shall
release any information concerning this Agreement or the transactions
contemplated by this Agreement which is intended for or may result in public
dissemination thereof, they shall cooperate with Buyer, shall furnish drafts of
all documents or proposed oral statements to Buyer for comments and shall not
release any information relating thereto without the written consent of Buyer.
Nothing contained herein shall prevent the Company or Stockholder from releasing
any information to any governmental authority if required to do so by law.
7.6 Voting by Stockholder. Stockholder agrees that until the
Release Time, Stockholder will vote all securities of the Company which he is
entitled to vote against (a) any merger, consolidation, reorganization other
business combination or recapitalization involving the Company, (b) any sale of
assets of the Company, (c) any stock split, stock dividend or reverse stock
split relating to any class or series of the Company's stock, (d) any issuance
of any shares of capital stock of the Company, any option, warrant or other
right calling for the issuance of any such share of capital stock or any
security convertible into or exchangeable for any such share of capital stock,
(e) any authorization of any other class or series of stock of the Company, (f)
the amendment of the Articles of Incorporation (or other charter document) or
the Bylaws of the Company or (g) any proposition the effect of which may be to
inhibit, restrict or delay the consummation of any of the transactions
contemplated by this Agreement or impair the contemplated benefits to the
Company of the transactions contemplated by this Agreement.
7.7 No Solicitation. Until the Release Time, the Company and
Stockholder shall not, and shall neither authorize nor permit any officer,
director, employee, counselor, agent, investment banker, accountant or other
representative of any of them, directly or indirectly, to initiate contact with
any person or entity in an effort to solicit any Takeover Proposal (as such term
is defined in this Section 7.7); cooperate with or furnish or cause to be
furnished any nonpublic information with respect to the financial condition,
results of operation, business, properties, assets, liabilities or future
prospects of the Company to any person or entity in connection with any Takeover
Proposal; negotiate with any person or entity with respect to any Takeover
Proposal; or enter into any agreement or understanding with respect to any
Takeover Proposal. The Company and Stockholder shall immediately give written
notice to Buyer of the details of any Takeover Proposal of which any of them
becomes aware. As used in this Section 7.7, "Takeover Proposal" shall mean any
proposal, other than as contemplated by this Agreement, for a merger,
consolidation, reorganization, other business combination or recapitalization
which involves the Company; for the acquisition of any of the capital stock of
the Company; for the acquisition of all or substantially all of the assets of
the Company other than in the ordinary course of its business; or the effect of
which may be to prohibit, restrict or delay the consummation of any of the
transactions contemplated by this Agreement or impair the contemplated benefits
to Buyer of any of the transactions contemplated by this Agreement.
8. Post-Closing Covenants of Stockholder.
Page 25 STOCK PURCHASE AGREEMENT
26
8.1 Stub Tax Return Filing. Stockholder, at his sole expense,
agrees to prepare and to file within the applicable filing time limits all
federal, state and local tax returns of the Company for all periods prior to the
Closing Date which are required to be filed and shall provide Buyer with copies
of all such returns and related work papers.
8.2 Excluded Liabilities. Stockholder agrees to assume,
discharge and hold the Company and Buyer harmless from any liability for the
Excluded Liabilities.
8.3 Post-Closing Monitoring and Other Services. Stockholder
agrees to cause JK Alarms of Arizona, Inc. to provide monitoring and other
services to the Alarm Accounts after the Closing Date pursuant to a Maintenance
and Monitoring Agreement, the form of which is attached hereto as SCHEDULE 8.3.
Page 26 STOCK PURCHASE AGREEMENT
27
9. Post-Closing Covenants of the Buyer.
9.1 Access to Books and Records. For a period of two (2) years
after the Closing Date, Buyer agrees that Stockholder and his representatives
shall have reasonable access to all books and records of the Company to the
extent that such access is lawful and may reasonably be required by the
Stockholder in connection with matters relating to or affected by the operations
of the Company prior to the Closing Date, including without limitation tax
matters and pending litigation. Such access shall be afforded by Buyer during
normal business hours.
9.2 Assumed Liabilities. Buyer agrees to assume, discharge and
hold Stockholder harmless from any liability for the Assumed Liabilities.
9.3 License Agreement. Buyer agrees to grant to JK Alarms of
Arizona, Inc. a license to use the Company's name after the Closing Date
pursuant to a License Agreement, the form of which is attached hereto as
SCHEDULE 9.3.
9.4 Ongoing Agreement. Buyer agrees to appoint JK Alarms of
Arizona, Inc. as a dealer after the Closing Date pursuant to an Agreement for
Ongoing Purchase and Sale of Alarm System Customer Accounts and addendum thereto
(collectively, the "Ongoing Agreement"), the form of which is attached hereto as
SCHEDULE 9.4.
10. Indemnification By Stockholder.
10.1 Indemnification. Notwithstanding any investigation by
Buyer, Stockholder agrees to indemnify, hold harmless and defend Buyer,
including Buyer's agents, employees, officers, directors and subsidiary and
parent corporations (collectively, the "Buyer Parties") from and against, and to
reimburse the Buyer Parties with respect to, any and all losses, damages,
liabilities, costs and expenses, including interest, penalties and reasonable
attorney's fees, incurred by the Buyer Parties, or any of them, by reason of or
arising out of or in connection with: (i) any breach or inaccuracy of any
representation or warranty of Stockholder made in this Agreement or the
schedules or exhibits hereto or of the Other Stockholder in that certain Stock
Purchase Agreement between Buyer and the Other Stockholder dated concurrently
herewith (the "Other Stock Purchase Agreement") or the schedules or exhibits
thereto; (ii) the nonfulfillment or inadequate performance of any covenant or
agreement on the part of Stockholder under this Agreement or the nonfulfillment
or inadequate performance of any covenant or agreement on the part of the Other
Stockholder under the Other Stock Purchase Agreement; (iii) any liabilities of
the Company to third parties of any nature arising out of any act performed or
state of facts suffered to exist by the Company on or prior to the Closing Date,
other than (a) the Assumed Liabilities, and (b) performance of the duties and
obligations under the Contracts with Subscribers after the Closing Date; (iv)
any claim or liability arising out of or related to the litigation and claims,
or threats thereof, described in SCHEDULE 10.1(IV) ("Existing Litigation
Claims"), as such schedule may be updated in the Closing Addendum; and (v) the
failure by the Company or its predecessors to comply,
Page 27 STOCK PURCHASE AGREEMENT
28
prior to the Closing Date, with any "three (3) or seven (7) day right of
rescission" law or similar right of rescission statute covering any of the Alarm
Accounts. This indemnification extends to any losses suffered or costs incurred
by the Buyer Parties arising out of or relating to claims pursuant to this
Section 10.1, including, without limitation, reasonable attorney's fees, whether
or not a lawsuit is commenced by any third party. Any claim for indemnification
by any of the Buyer Parties pursuant to this Section 10.1 shall hereinafter be
referred to as a "Buyer's Claim."
10.2 Survivability. In order for any Buyer Parties to be
entitled to indemnification for a Buyer's Claim as provided for in Section 10.1,
a notice of Buyer's Claim must be submitted to Stockholder within the following
applicable time limitations:
(a) Except as provided in Section 10.2(b) or in cases of
fraud or intentional misrepresentation, a Buyer's Claim pursuant to Section
10.1(i) must be submitted on or before December 31, 1998;
(b) A Buyer's Claim pursuant to Section 10.1(i) for a
breach of Sections 5.5, 5.11, 5.12 and 5.14 must be submitted before the
expiration of the applicable statute of limitations relative to such Buyer's
Claim;
(c) A Buyer's Claim pursuant to Section 10.1(ii) for a
breach of Section 19 of this Agreement or Section 9 of the Other Stock Purchase
Agreement must be submitted before the expiration of the applicable statute of
limitations relative to such Buyer's Claim;
(d) All other Buyer's Claims must be submitted on or
before July 1, 1999.
10.3 Buyer's Claim Basket and Liability Limit. With the
exception of Buyer's Claims under Section 10.1(iv), Stockholder's obligations
with respect to indemnity pursuant to this section shall be limited to the
extent that the aggregate of such Buyer's Claims must first exceed Fifty
Thousand Dollars ($50,000) ("Buyer's Claim Basket"); provided, however, any
Buyer's Claim resulting from Stockholder's (or their designee's) failure to pay
or otherwise satisfy any of the Excluded Liabilities shall not be included in
the Buyer's Claim Basket or Liability Limit described in this Section 10.3. In
no event shall the total liability of the Stockholder for all Buyer's Claims
exceed the Purchase Price ("Liability Limit"); provided, however, the Liability
Limit shall not apply to a breach of Sections 5.5, 5.11, 5.12 or 5.14 of this
Agreement and Section 4.4 of the Other Stock Purchase Agreement.
10.4 Notice; Tendering Defense to Stockholder. Stockholder's
obligation to indemnify and reimburse Buyer hereunder are subject to prior
written thirty (30) day notice by Buyer of a Buyer's Claim, unless the Buyer's
Claim involves litigation, in which case Buyer shall provide Stockholder with
notice of such litigation within twenty (20) days after receipt of such
complaint by Buyer; and provided, however, that Stockholder shall have the right
to defend any
Page 28 STOCK PURCHASE AGREEMENT
29
Buyer's Claim made by a third party, and Stockholder shall have the right to
control the defense, settlement or compromise of such Buyer's Claim and Buyer
shall have the right to be kept currently informed and to reasonably participate
in all aspects of such litigation to the extent deemed necessary to protect
Buyer's interest, unless the amount of damages demanded or alleged or prayed for
in the complaint (or if no damages are demanded, alleged or prayed for in the
complaint, the damages reasonably likely to result from such a Buyer's Claim)
exceeds the Stockholder's Liability Limit, as such term is defined in Section
10.3, in which case the party with the greatest economic risk shall have the
right to such control, subject to the other party's right of information and
participation. Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall control the defense, settlement or compromise of any
Buyer's Claim where the damages demanded or alleged or prayed for in the
complaint (or if no damages are demanded or alleged or prayed for in the
complaint, the damages reasonably likely to result from such a Buyer's Claim) do
not exceed the Buyer's Claim Basket, and after the Buyer's Claim Basket has been
exceeded, Buyer shall control the defense, settlement or compromise of any
Buyer's Claim where the damages demanded or alleged or prayed for in the
complaint do not exceed the sum of Two Thousand Five Hundred Dollars ($2,500),
and Stockholder shall have no right to be kept informed or to participate in
such litigation.
In addition, Stockholder will indemnify and hold harmless
Buyer from, for and against any costs and expenses (including attorney's fees at
trial and in any appeal) which it may suffer or incur in connection with
enforcement of the indemnification obligation of the Stockholder hereunder.
10.5 Right of Set Off. In addition to the rights of Buyer
under Sections 10.1 through 10.4, Stockholder agrees that Buyer shall have the
right at any time following the Closing Date to set off against any amounts
payable to Stockholder under this Agreement an amount equal to any and all
losses, damages, liabilities, costs and expenses incurred by Buyer, including
without limitation, reasonable attorney's fees, for which Buyer has a right to
indemnification under Sections 10.1 through 10.4. If Buyer sets off any amounts
payable to Stockholder under this Agreement, then Buyer shall provide to
Stockholder at least five (5) days prior written notice thereof and describe in
reasonable detail the basis for such set off.
11. Indemnification by Buyer.
11.1 Indemnification. Notwithstanding any investigation by
Stockholder, Buyer agrees to indemnify, hold harmless and defend Stockholder,
including Stockholder's agents (collectively, the "Stockholder Parties") from
and against, and to reimburse the Stockholder Parties with respect to, any and
all losses, damages, liabilities, costs and expenses, including interest,
penalties and reasonable attorney's fees, incurred by the Stockholder Parties,
or any of them, by reason of or arising out of or in connection with: (i) any
breach or inaccuracy of any representation or warranty of Buyer made in this
Agreement or the schedules or exhibits hereto, (ii) the nonfulfillment or
inadequate performance of any covenant or agreement on the part of Buyer under
Page 29 STOCK PURCHASE AGREEMENT
30
this Agreement or (iii) any liabilities of the Company to third parties of any
nature arising out of any act performed or state of facts suffered to exist by
the Company on or after the Closing Date. This indemnification extends to any
losses suffered or costs incurred by the Stockholder Parties arising out of or
relating to claims pursuant to this Section 11.1, including, without limitation,
reasonable attorney's fees, whether or not a lawsuit is commenced by any third
party. Any claim for indemnification by any of the Stockholder Parties pursuant
to this Section 11.1 shall hereinafter be referred to as a "Stockholder's
Claim."
11.2 Survivability. In order for any Stockholder Parties to be
entitled to indemnification for a Stockholder's Claim as provided for in Section
11.1, a notice of Stockholder's Claim must be submitted to Buyer within the
following applicable time limitations:
(a) Except in cases of fraud or intentional
misrepresentation, a Stockholder's Claim pursuant to Section 11.1(i) must be
submitted on or before December 31, 1998; and
(b) All other Stockholder's Claims must be
submitted on or before July 1, 1999.
11.3 Stockholder's Claim Basket and Liability Limit. Buyer's
obligations with respect to indemnity pursuant to this section shall be limited
to the extent that the aggregate of such Stockholder's Claims must first exceed
Fifty Thousand Dollars ($50,000) ("Stockholder's Claim Basket"). In no event
shall the total liability of the Buyer for all Stockholder's Claims exceed the
Purchase Price ("Buyer's Liability Limit"); provided, however, any Stockholder's
Claim resulting from Buyer's (or its designee's) failure to pay or otherwise
satisfy any of the Assumed Liabilities shall not be included in the
Stockholder's Claim Basket or Buyer's Liability Limit described in this Section
11.3.
11.4 Notice; Tendering Defense to Buyer. Buyer's obligation to
indemnify and reimburse Stockholder hereunder is subject to prior written thirty
(30) day notice by Stockholder of a Stockholder's Claim, unless the
Stockholder's Claim involves litigation, in which case Stockholder shall provide
Buyer with notice of such litigation within twenty (20) days after receipt of
such complaint by Stockholder; provided, however, that Buyer shall have the
right to defend any Stockholder's Claim made by a third party, and Buyer shall
have the right to control the defense, settlement or compromise of such
Stockholder's Claim and Stockholder shall have the right to be kept currently
informed and to reasonably participate in all aspects of such litigation to the
extent deemed necessary to protect Stockholder's interests, unless the amount of
damages demanded or alleged or prayed for in the complaint (or if no damages are
demanded, alleged or prayed for in the complaint, the damages reasonably likely
to result from such a Stockholder's Claim) exceeds the Buyer's Liability Limit,
in which case the party with the greatest economic risk shall have the right to
such control, subject to the other party's right of information and
participation. Provided, however, that Stockholder shall control the defense,
settlement or compromise of any Stockholder's
Page 30 STOCK PURCHASE AGREEMENT
31
Claim where the damages demanded or alleged or prayed for in the complaint (or
if no damages are demanded or alleged or prayed for in the complaint, the
damages reasonably likely to result from such a Stockholder's Claim) do not
exceed the Stockholder's Claim Basket, and after the Stockholder's Claim Basket
has been exceeded, Stockholder shall control the defense, settlement or
compromise of any Stockholder's Claim where the damages alleged or prayed for in
the complaint do not exceed the sum of Two Thousand Five Hundred ($2,500), and
Buyer shall have no right to be kept informed or to participate in such
litigation.
In addition, Buyer will indemnify and hold harmless
Stockholder from, for and against any costs and expenses (including attorney's
fees at trial and in any appeal) which they may suffer or incur in connection
with enforcement of the indemnification obligation of the Buyer hereunder.
12. Conditions Precedent to Obligations of Buyer. All obligations
of Buyer at the Closing are subject, at Buyer's option, to the fulfillment prior
to or at the Closing by the Stockholder of each of the following:
12.1 Closing Addendum. The execution and delivery by
Stockholder of the Closing Addendum.
12.2 Agreement and Schedules. The execution and delivery by
Stockholder of all schedules and exhibits required by this Agreement to be
delivered on the date hereof and the Closing Date, including the updating of
such schedules and exhibits.
12.3 Corporate Actions of the Company. The receipt by Buyer of
the resignations of all of the directors and officers of the Company as and to
the extent requested by Buyer.
12.4 Authorization of the Company. The Board of Directors and
the stockholders of the Company shall, to the extent required by applicable law,
have approved this Agreement. Certified copies of the Company's Board of
Directors minutes authorizing the transactions contemplated by this Agreement
shall have been delivered to Buyer.
12.5 Good Standing Certificate. Receipt by Buyer of a
certificate from the Corporation Commission of the State of Arizona, dated as
close to the Closing Date as possible, stating that the Company is an existing
Arizona corporation.
12.6 No Pending Litigation. There shall not be pending or
threatened any claim, proceeding, investigation or inquiry, by any person,
governmental body or authority, seeking to prevent or change the terms of, or
obtain damages in connection with, this Agreement or the transaction
contemplated hereby or which questions the validity or legality of the
consummation of the transaction contemplated hereby. No action or proceeding
relating to any item that is not
Page 31 STOCK PURCHASE AGREEMENT
32
disclosed in SCHEDULE 5, as such schedule may be updated on the Closing Date in
the Closing Addendum, shall have been instituted or threatened prior to the
Closing Date that, if concluded adversely to the Company, would be materially
adverse to Buyer's ownership of the AAA Stock and operation of the Assets and
business of the Company.
12.7 Due Diligence. Buyer shall have completed a due diligence
review of the Assets and the business of the Company satisfactory to Buyer in
its sole discretion.
12.8 Transfer of Excluded Assets and Excluded Liabilities.
Buyer shall have received evidence satisfactory to Buyer in its sole discretion
that the Excluded Assets and Excluded Liabilities have been transferred to
Stockholder or to Stockholder's designee.
12.9 AAA Stock Certificates. Receipt by Buyer of the AAA Stock
certificates and executed transfer documents.
12.10 Other Stock Purchase Agreement. The Company and the
Other Stockholder shall have executed and delivered to Buyer the Other Stock
Purchase Agreement.
12.11 Agreements With JK Alarms of Arizona, Inc. JK Alarms of
Arizona, Inc. and Stockholder shall have executed and delivered to Buyer the
Ongoing Agreement, the License Agreement and the Maintenance and Monitoring
Agreement.
12.12 Registration Rights Agreement. Stockholder shall have
executed and delivered to Buyer as of the date of this Agreement the
Registration Rights Agreement and Affidavit and Agreement of Prospective
Investor in the form attached hereto as SCHEDULE 12.12.
12.13 Opinion Letter of Stockholder's Legal Counsel. Receipt
by Buyer of the opinion of Stockholder's legal counsel in a form acceptable to
Buyer.
12.14 Stockholder's Certificate. Receipt by Buyer of a
certificate, dated as of the Closing Date, signed by Stockholder, to the effect
that all of the representations and warranties of the Company and Stockholder
set forth in Section 5 are true and correct as of the Closing Date and that
Stockholder, in all material respects, has complied with and performed the
terms, covenants, agreements and conditions required to be performed by
Stockholder as of the Closing Date under this Agreement.
12.15 Miscellaneous. Receipt by Buyer of all consents and such
additional instruments and documents as may reasonably be required by this
Agreement or to consummate the transactions contemplated herein.
Page 32 STOCK PURCHASE AGREEMENT
33
13. Conditions Precedent to Obligations of Stockholder. All
obligations of Stockholder at the Closing are subject, at the option of
Stockholder, to the fulfillment prior to or at the Closing by Buyer of each of
the following:
13.1 Closing Addendum. The execution and delivery by Buyer of
the Closing Addendum.
13.2 Closing Payment. Receipt by Stockholder of the Closing
Payment.
13.3 Closing Date QRR. The QRR as of the Closing Date shall
have equaled at least Ninety Thousand Dollars ($90,000).
13.4 Authorization of Buyer. The Board of Directors of Buyer
shall have approved, to the extent required under applicable law or Buyer's
Certificate of Incorporation and Bylaws, (i) the Agreement and the execution and
delivery hereof by the Buyer and (ii) the performance by Buyer of all of its
obligations pursuant to this Agreement. Certified copies of Buyer's Board of
Directors minutes authorizing the transactions contemplated by this Agreement
shall have been delivered to Stockholder.
13.5 Other Stock Purchase Agreement. Buyer shall have executed
and delivered to the Company and the Other Stockholder the Other Stock Purchase
Agreement.
13.6 Agreements with JK Alarms of Arizona, Inc. Buyer shall
have executed and delivered to Stockholder and JK Alarms of Arizona, Inc. the
Ongoing Agreement, the License Agreement and the Maintenance and Monitoring
Agreement.
13.7 Registration Rights Agreement. Parent shall have executed
and delivered to Stockholder as of the date of this Agreement the Registration
Rights Agreement in the form attached hereto as SCHEDULE 12.12.
13.8 Registration Statement. Parent shall have filed the
Registration Statement with the Securities and Exchange Commission for the Pro
One Stock.
13.9 Buyer's Certificate. Receipt by Stockholder of a
certificate, dated as of the Closing Date, signed by Buyer to the effect that
all of the representations and warranties of Buyer set forth in Section 6 are
true and correct as of the Closing Date and that Buyer, in all material
respects, has complied with and performed the terms, covenants, agreements and
conditions required to be performed by Buyer as of the Closing Date under this
Agreement.
13.10 Miscellaneous. Receipt by Stockholder of all consents
and such additional instruments and documents as may reasonably be required by
this Agreement or to consummate the transactions contemplated herein.
Page 33 STOCK PURCHASE AGREEMENT
34
14. Closing.
14.1 Closing Date. The Closing of the transaction contemplated
by this Agreement shall take place at the offices of Xxxxx Xxxx LLP, 0000 X.
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxx 00000, at 10:00 a.m., local time,
on June 30, 1997. The Closing may occur at such different place, such different
time or at such different date or a combination thereof as Buyer and Stockholder
agree in writing.
14.2 Closing Addendum. Buyer and Stockholder shall execute an
addendum to this Agreement at the Closing (the "Closing Addendum") setting forth
the Purchase Price and Deferred Payment and updating the schedules and exhibits
hereto. Except as otherwise set forth in the Closing Addendum, all covenants,
representations, warranties and agreements made by the parties hereunder shall
remain in full force and effect.
15. Termination.
15.1 Cut-off Date. If Closing does not occur for any reason on
or before July 15, 1997, any party that has been diligent in its efforts to
consummate the transaction contemplated by this Agreement may cancel and
terminate this Agreement.
15.2 Termination for Cause. If, pursuant to the provisions of
Section 12 and 13 of this Agreement, Stockholder or Buyer is not obligated at
the Closing to consummate this Agreement, then the party who is not so obligated
may terminate this Agreement.
15.3 Termination Without Cause. Anything herein or elsewhere
to the contrary notwithstanding, this Agreement may be terminated and abandoned
at any time without further obligation or liability on the part of any party in
favor of any other by mutual consent of Buyer and Stockholder.
15.4 Termination Procedure. Any party having a right to
terminate this Agreement may terminate this Agreement by delivering to the other
parties written notice of the termination, and thereupon, this Agreement shall
be terminated without obligation or liability of any party in favor of any other
party.
16. Expenses. Buyer, the Company and Stockholder shall each pay
all of their own respective expenses incurred by or on behalf of each of them in
connection with this Agreement and the transactions contemplated hereunder,
including, but not limited to, all due diligence, legal and accounting expenses.
17. Nature of Statements and Survival of Representations,
Warranties And Agreements. All statements of fact and only those statements of
facts contained in any written statement, certificate, exhibit, schedule or
other document delivered by or on behalf of the parties
Page 34 STOCK PURCHASE AGREEMENT
35
pursuant hereto or in connection with the consummation of the transactions
contemplated hereby are deemed representations and warranties made hereunder.
All covenants, representations, warranties and agreements made by the parties
hereunder shall survive the Closing Date, the delivery of the AAA Stock and the
payment of the Purchase Price therefor and the dissolution and liquidation of
any party hereto and remain effective regardless of any investigation at any
time (whether before or after the date of this Agreement) made by or on behalf
of any party or of any information any party may obtain or have (whether before
or after the date of this Agreement) in respect thereof and regardless of any
non-exercise by a party of any rights hereunder.
18. Transition Support. After the Closing Date and continuing for
a period of no less than thirty (30) days and no more than one hundred eighty
(180) days, Stockholder, at no cost to Buyer, shall make the former "key"
executives of the Company listed in SCHEDULE 18 (who terminated their employment
with the Company as of or prior to the Closing Date) reasonably available to
respond to Buyer's questions as necessary to assist Buyer during such period
with the transition of Assets, business and operations to Buyer as a result of
the sale contemplated hereby. There will be no charge to Buyer for such
transition assistance, other than reimbursement for reasonable out-of-pocket
expenses directly incurred in connection with any travel or other expenses
undertaken at the written request of Buyer.
19. Nonsolicitation and Confidentiality.
19.1 Nonsolicitation Covenants. Stockholder agrees that
between the date of the termination of the Ongoing Agreement for any reason and
the date which is twenty (20) years following the date of this Agreement,
Stockholder will not, individually or as a director, officer, partner, limited
partner, member, employee, agent, representative, stockholder, creditor or
consultant or in any other capacity with any business, in any manner, directly
or indirectly, in or with regard to any Alarm Accounts in the State of Arizona,
solicit, divert or knowingly accept orders for sale or leasing, installation,
maintenance or monitoring of alarm systems or for providing armed response
services from any Subscribers whose Alarm Accounts are owned by the Company as
of the Closing Date. Stockholder also agrees that between the date of
termination of the Ongoing Agreement for any reason and the date which is twenty
(20) years following the date of this Agreement, if any of the Stockholder
individually or as a director, officer, partner, limited partner, member,
employee, agent, representative, stockholder, creditor or consultant or in any
other capacity with any business, in any manner, directly or indirectly, in or
with regard to any Alarm Accounts in the State of Arizona, solicit, divert or
unknowingly accept orders for sale or leasing, installation, maintenance or
monitoring of alarm systems or for providing armed response services from any
Subscribers whose Alarm Accounts are owned by the Company as of the Closing
Date, that Stockholder shall be responsible for notifying Buyer promptly (but in
no event more than thirty (30) days after discovery of such Subscriber's alarm
account) and shall, upon request of Buyer, transfer to Buyer such Subscriber's
alarm account, at no cost to Buyer, plus all amounts prepaid by such Subscriber
for monitoring and other services to be performed by Buyer after the date of
such transfer. Before accepting new subscribers at JK Alarms of Arizona, Inc. or
any other alarm companies
Page 35 STOCK PURCHASE AGREEMENT
36
in which Stockholder has any ownership interest or management responsibility,
they shall determine if the new subscriber's address is the same address as any
of the Subscribers, and shall not, twenty (20) years after the date of this
Agreement, accept such new subscriber if the subscribers' Alarm Account was
owned by the Company. The parties agree that general advertising which is not
directed to or targeted to the Subscribers shall not violate the nonsolicitation
restrictions set forth herein, so long as all other restrictions against
diverting or knowingly accepting orders for sale or leasing, installation,
maintenance or monitoring of alarm systems or for providing armed response
services are observed. Notwithstanding the foregoing, Stockholder directly or by
and through JK Alarms of Arizona, Inc. may contact any Subscribers whose Alarm
Accounts are owned by the Company as of the Closing Date for a period of six (6)
months following the date of this Agreement to offer for sale and sell to such
Subscribers radio service; provided, however, that such services must be offered
at prices approved by Buyer and upon such other terms and conditions upon which
Stockholder and Buyer initially agree. Stockholder also agrees that, for five
(5) years following the date of this Agreement, Stockholder will not,
individually or as a director, officer, partner, limited partner, member,
employee, agent, representative, stockholder, creditor or consultant or in any
other capacity with any business, recruit, offer to employ, or otherwise solicit
the employment of any person who was at any time within three (3) months prior
to such action an employee of Buyer or to whom the Company has extended an offer
to continue their employment after the Closing Date; provided however, that a
general classified advertisement which is not directed to Buyer's or the
Company's employees shall not violate the restrictions set forth herein so long
as no offer of employment is made to any employee of Buyer or the Company or to
a person who was an employee of Buyer or the Company within the previous three
(3) months.
19.2 Nondisclosure of Confidential Information. Stockholder
agrees to maintain as secret and confidential all "Confidential Information," as
defined herein, and agrees not to use, disclose, transfer, sell or make such
information available to any successors or third parties, except as authorized
in advance and in writing by Buyer or in the following circumstances: (a) as
required in order to comply with any subpoena, court order or applicable law,
provided that the disclosing party shall use its best efforts to give Buyer
prior written notice of such disclosure or (b) if such information becomes
publicly available not due to the fault of Stockholder. The term "Confidential
Information" means any trade secrets, proprietary or other information which is
either reasonably designated in writing to Stockholder as confidential by Buyer
or reasonably known by Stockholder to be confidential relating to the Alarm
Accounts or Assets, including without limitation, any of the following
information, which is hereby designated as confidential: any customer or
Subscriber lists; any lists, notes, or compilations which contain the names,
addresses, telephone numbers or any contract information for or relating to the
Subscribers; monitoring information and Subscriber codes and passwords; and
copies of contracts, agreements, and related documents between the Company and
the Subscribers under the Alarm Accounts.
19.3 Enforcement. Stockholder acknowledges and agrees that the
time, scope, geographic area and other provisions of Sections 19.1 and 19.2 have
been specifically negotiated by sophisticated parties and specifically hereby
agree that such time, scope, geographic
Page 36 STOCK PURCHASE AGREEMENT
37
area and other provisions are reasonable under the circumstances. Stockholder
further agrees that if, at any time, despite the express agreement of the
parties hereto, a court of competent jurisdiction holds that any portion of
Sections 19.1 and 19.2 are unenforceable for any reason, the maximum
restrictions of time, scope or geographic area reasonable under the
circumstances, as determined by such court, will be substituted for any such
restrictions held unenforceable. Stockholder agrees that Buyer will suffer
irreparable harm if any of the Stockholder fails to comply with the provisions
of Section 19 this Agreement and that Buyer will be entitled to injunctive
relief to enforce the terms of this Agreement in addition to any other remedies
available to Buyer.
Page 37 STOCK PURCHASE AGREEMENT
38
20. Miscellaneous.
20.1 Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if served either
personally or if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other
communication is served personally, or by facsimile (with verbal verification of
complete receipt), service shall be conclusively deemed made at the time of such
personal service or facsimile transmission. If such notice, demand or other
communication is given by mail, such notice shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail
addressed to the party to whom such notice, demand or other communication is to
be given as hereinafter set forth:
If to Company or Stockholder: Xxxxxxx X. Xxxx
Able Alarms of Arizona, Incorporated
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxx
Xxxxx Xxxx LLP
0000 X. Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
If to Buyer: Protection One Alarm Monitoring, Inc.
0000 X.X. Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxx 00000
Attention: Xxxx X. Xxxxx
Telecopier: (000) 000-0000
and
Protection One Alarm Monitoring, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx III
Telecopier: (000) 000-0000
Page 38 STOCK PURCHASE AGREEMENT
39
With a copy to: Xxxxx X. Xxxxxx
Xxxxxxxx, Wada & Xxxx, P.C.
000 X.X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Telecopier: (000) 000-0000
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner provided hereby to the other party or parties hereto.
20.2 Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless in writing and signed by all
parties hereto.
20.3 Waiver. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof. All waivers must be in writing and signed by the party waiving
compliance.
20.4 Knowledge of Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by a reference to
knowledge, information and/or belief of the party making such representation and
warranty, such party shall have made reasonable inquiry as to the matters that
are the subject of such representations and warranties.
20.5 Binding Effect. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and, to
the extent permitted by Section 20.6, assigns.
20.6 Assignment. The Company and Stockholder may not assign
any rights or delegate any duties under the Agreement with the prior written
consent of Buyer (including without limitation any rights in and to the Deferred
Payment).
20.7 Separate Counterparts. This document may be executed in
one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.
20.8 Further Assurances. Each of the parties hereto shall
execute and deliver any and all additional papers, documents, and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
20.9 Applicable Law; Severability; Attorney's Fees. This
Agreement shall, in all respects, be governed by the laws of the State of
California applicable to agreements executed and to be wholly performed within
the State of California. Nothing contained herein
Page 39 STOCK PURCHASE AGREEMENT
40
shall be construed so as to require the commission of any act contrary to law,
and wherever there is any conflict between any provision contained herein and
any present or future statute, law, ordinance or regulation contrary to which
the parties have no legal right to contract, the latter shall prevail but the
provision of this document which is affected shall be curtailed and limited only
to the extent necessary to bring it within the requirements of the law. In the
event any action or arbitration is instituted by a party hereto to enforce or
construe any term or to recover damages resulting from the breach of any term of
this Agreement, the prevailing party in such action or arbitration shall be
entitled to such reasonable attorney's fees and costs and expenses (including
the costs of the arbitrator) as may be fixed by the court or arbitrator. The
jurisdiction for any arbitration or judicial proceedings brought by either party
against the other party with respect to this Agreement shall be Los Angeles
County, California.
20.10 Arbitration. Either party may elect to require that any
controversy arising out of or relating to this Agreement be determined by
arbitration in accordance with the then effective commercial arbitration rules
of American Arbitration Association. All statutes of limitation which would
otherwise be applicable shall apply to the arbitration proceeding. Any judgment
upon the award rendered pursuant to arbitration may be entered in any court
having jurisdiction. In lieu of using the American Arbitration Association, the
parties may agree to select a single arbitrator who is experienced in the alarm
industry. If any legal action or other proceeding has been brought by either
party to construe, interpret or enforce this Agreement; (i) the party who is the
defendant or respondent in such proceeding shall be deemed to have waived the
option to arbitrate if a general appearance is made in such proceeding prior to
filing a claim in arbitration and (ii) the party who is the plaintiff or
petitioner in such proceeding shall be deemed to have waived the option to
arbitrate if a claim for arbitration is not filed within sixty (60) days after a
general appearance has been made by the adverse party in such proceeding. If
either party exercises the option to arbitrate, arbitration shall be mandatory
and any pending judicial proceeding shall be stayed except to the extent
permitted in this section.
20.11 Provisional Remedies. The following remedies may be
exercised by either party regardless of whether an arbitration proceeding is
then pending and without waiving any right to require arbitration: (i)
injunctive or other equitable relief to the extent such relief does not conflict
with any arbitration award; and/or (ii) set off or recoupment.
20.12 Captions. Any captions to the sections of this Agreement
are solely for the convenience of the parties and are not a part of this
Agreement and shall not be used for the determination of the validity of this
Agreement or any provision therefor.
20.13 Entire Agreement. This document, together with any
exhibits, schedules or documents attached hereto, or delivered and initialed by
the parties in connection herewith, constitutes the entire understanding and
agreement of the parties with respect to the subject matter of this Agreement.
Page 40 STOCK PURCHASE AGREEMENT
41
20.14 No Third Party Beneficiaries. Nothing contained in this
Agreement shall be construed to give any person other than Buyer, the Company
and Stockholder any legal or equitable right, remedy or claim under or with
respect to this Agreement.
20.15 Confidentiality. Each party shall hold in confidence the
fact of the existence of and all economic and other terms of this Agreement and
the transactions contemplated herein (collectively, "Confidential Terms"). The
parties agree that disclosure of any Confidential Terms shall be limited solely
to management of and advisors to Buyer and Stockholder on a "need to know"
basis, and such management and advisors shall be advised of and agree to be
bound by the provisions of this Section 20.15. In furtherance and not in
limitation of the foregoing, no statements shall be issued regarding this
Agreement or the economic or other terms of the transactions contemplated herein
without the prior written consent of Buyer and Stockholder. Notwithstanding
anything to the contrary set forth in this Agreement or any other documents
executed by the parties, Buyer is authorized to disclose the existence of and
all economic and other terms of this Agreement in connection with any state or
federal securities filings, offering circulars, registration statements, or loan
agreements of Buyer or its parent company, Protection One, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COMPANY: ABLE ALARMS OF ARIZONA, INCORPORATED
By:
----------------------------------
Title:
-------------------------------
STOCKHOLDER:
Xxxxxxx X. Xxxx
BUYER: PROTECTION ONE ALARM MONITORING, INC.
By:
----------------------------------
Its:
----------------------------------
Page 41 STOCK PURCHASE AGREEMENT
42
SCHEDULE 1.3(A)
ASSUMED LIABILITIES
(a) Assumed Liabilities Not Deducted from the Purchase Price - The
obligations of the Company to Subscribers described in Section 1.3.
(b) Assumed Liabilities Deducted from the Purchase Price - None.
Page 42 STOCK PURCHASE AGREEMENT
43
SCHEDULE 1.15
CLOSING PURCHASE PRICE SCHEDULE
Closing Price Components
1. Fifty percent (50%) of the QRR of the Alarm Accounts of
$ , multiplied by a factor of thirty-eight (38): $
------------ -----------------
less
2. The Unearned Income of $ : $
------------ -----------------
less
3. The Assumed Liabilities, if any, described in subparagraph
(b) of SCHEDULE 1.3 of the Closing Addendum $
-----------------
PURCHASE PRICE $
=================
DEFERRED PAYMENT
(Twelve percent (12%) of the QRR of the Alarm Accounts of $ ,
------------
multiplied by a factor of thirty-nine (39)) $ $
-----------------
CLOSING PAYMENT
(The Purchase Price less the Deferred Payment, comprised of $
----------
payable by check or wire transfer (sixty percent (60%) of the Purchase
Price, less the Deferred Payment) and of shares of Pro One
--------
Stock ($ divided by the Closing Value (forty percent (40%) of
----------
the Purchase Price)) $ $
-----------------
Page 43 STOCK PURCHASE AGREEMENT
44
SCHEDULE 5
STOCKHOLDER'S DISCLOSURE SCHEDULE
See attached.
Stockholder has employed Advent Financial as a broker, finder or agent in this
transaction and has agreed to pay Advent Financial a brokerage fee, finder's fee
or commission in connection with the transactions contemplated by this
Agreement.
Page 44 STOCK PURCHASE AGREEMENT
45
SCHEDULE 6
BUYER'S DISCLOSURE SCHEDULE
None.
Page 45 STOCK PURCHASE AGREEMENT
46
SCHEDULE 8.3
MAINTENANCE AND MONITORING AGREEMENT
See attached.
Page 46 STOCK PURCHASE AGREEMENT
47
SCHEDULE 9.3
LICENSE AGREEMENT
See attached.
Page 47 STOCK PURCHASE AGREEMENT
48
SCHEDULE 9.4
ONGOING AGREEMENT
See attached.
Page 48 STOCK PURCHASE AGREEMENT
49
SCHEDULE 10.1(IV)
EXISTING LITIGATION CLAIMS
None.
Page 49 STOCK PURCHASE AGREEMENT
50
SCHEDULE 12.12
FORM OF REGISTRATION RIGHTS AGREEMENT AND AFFIDAVIT
See attached.
Page 50 STOCK PURCHASE AGREEMENT
51
SCHEDULE 18
KEY EXECUTIVES
Xxxxxxx X. Xxxx
Page 51 STOCK PURCHASE AGREEMENT
52
ADDENDUM TO STOCK PURCHASE AGREEMENT
DATED: June 30, 1997
BETWEEN: Protection One Alarm Monitoring, Inc.,
a Delaware corporation
0000 X.X. Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxx 00000 ("Buyer")
AND: Able Alarms of Arizona, Incorporated,
an Arizona corporation
0000 Xxxx Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000 ("Company")
AND: Xxxxxxx X. Xxxx
0000 Xxxx Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000 ("Stockholder")
On June 20, 1997, the parties executed and delivered a Stock
Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Defined Terms. Unless given a different meaning herein,
all capitalized terms used in this Addendum to Asset Purchase Agreement
("Closing Addendum") shall have the meanings ascribed to them in the Agreement.
2. Continuing Effectiveness. Except as expressly modified
herein, all of the terms, conditions, covenants and exhibits set forth in the
Agreement remain in full force and offset among the parties.
3. Closing Date and Closing Value. The Closing Date is
June 30, 1997. The Closing Value for the shares of Pro One Stock of Parent
issued to Company at Closing is Thirteen and Twenty-Five One Thousands Dollars
($13.025) per share.
4. Closing Date Exhibits. The following Exhibits are
attached hereto and incorporated in this Closing Addendum and the Agreement by
this reference:
a. Schedule 1.1 - Alarm Accounts.
b. Schedule 1.2 - Excluded Assets.
c. Schedule 1.3(a) - Assumed Liabilities.
53
d. Schedule 1.3(b) - Excluded Liabilities.
e. Schedule 1.14 - Other Property.
f. Schedule 1.15 - Closing Purchase Price Schedule.
g. Schedule 1.20 - Telephone Lines.
h. Schedule 4.1 - Third-Party Guarantees.
i. Schedule 4.2 - Contracts and Agreements.
j. Schedule 4.3 - Restrictive Agreements.
k. Schedule 5 - Stockholder's Disclosure Schedule.
l. Schedule 10.1(iv) - Existing Litigation Claims.
5. Purchase Price. At the Closing the Purchase Price for the AAA
Stock purchased hereunder is One Million Nine Hundred Fourteen Thousand Five
Hundred Ninety and 57/100 Dollars ($1,914,590.57) and is based on the
calculations set forth in the Closing Purchase Price Schedule attached as
Schedule 1.15.
6. Payment of Purchase Price. Buyer shall pay to Stockholder the
following:
a. At the Closing, the Closing Date Payment is One Million
Three Hundred Sixty-Three Thousand Four Hundred Thirty-Seven and 03/100 Dollars
($1,363,437.03), which shall be paid as follows:
i. The sum of Five Hundred Ninety-Seven Thousand
Six Hundred and 80/100 Dollars ($597,600.80) shall be paid to Stockholder in
cash by wire transfer to the account or accounts designated by Stockholder.
ii. The sum of Seven Hundred Sixty-Five Thousand
Eight Hundred Thirty-Six and 23/100 Dollars ($765,836.23) shall be paid to
Stockholder by delivery of Fifty-Eight Thousand Seven Hundred Ninety-Seven
(58,797) shares of Pro One Stock within two (2) business days of the date
hereof (based upon the Closing Value of Thirteen and 25/1000 Dollars [$13.25])
per share and payment in cash of the sum of Five and 34/100 Dollars ($5.34) in
lieu of issuing fractional shares will be wire transferred pursuant to Section
6(a)(i) hereof.
b. The Deferred Payment amount is Five Hundred Fifty-One
Thousand One Hundred Fifty-Three and 54/100 Dollars ($551,153.54).
2
54
7. Keys. Stockholder shall return to the Subscribers any and all
keys in the Company's possession for such Subscribers as of the Closing Date
within ninety (90) days of the Closing Date.
8. Stub Tax Return Filing. Section 8.1 of the Agreement is hereby
amended in its entirety to provide as follows:
Stockholder, at his sole expense, shall prepare and file within ninety
(90) days after the Closing Date all federal, state and local tax
returns of the Company for all periods prior to the Closing Date which
are required to be filed and shall provide Buyer with all copies of such
returns and related work papers.
9. Access to Books and Records. Section 9.1 of the Agreement is
hereby amended in its entirety to provide as follows:
For a period of two (2) years after the Closing Date, Stockholder agrees
that he shall store all books and records of the Company. Stockholder
agrees during that period that Buyer and its representatives shall have
access to all such books and records. As the expiration of such two (2)
year period or at such earlier time as requested by Buyer, Seller shall
at buyer's expense deliver such books and records to Buyer at such
location or locations designated by Buyer.
10. Certification of Stockholder. Stockholder certifies that all
representations and warranties of the Company and Stockholder set forth in
Section 5 of the Agreement are true and correct as of the Closing Date and that
the Company and Stockholder has, in all material respects, complied with and
performed the terms, covenants, agreements and conditions required to be
performed by the Company and Stockholder as of the Closing Date under the
Agreement.
11. Certification of Buyer. Buyer certifies that all representations
and warranties of Buyer set forth in Section 6 of the Agreement are true and
correct as of the Closing Date and that Buyer has, in all material respects,
complied with and performed the terms, covenants, agreements and conditions
required to be performed by Buyer as of the Closing Date under the Agreement.
12. Exchange of Pro One Stock. Section 3.2.2. of the Agreement is
hereby amended in its entirety to provide as follows:
If the Registration Statement filed by Parent shall not have become
effective by August 31, 1997, then Stockholder shall have the option for
a period of ten (10) days thereafter either (i) to elect to tender to
Buyer the stock certificates (the "Certificates") for the Pro One Stock
delivered by Buyer to Stockholder pursuant to
3
55
Section 3.1.1(b), and Buyer, upon receipt of such Certificates, shall
pay to Stockholder an amount equal to forty percent (40%) of the
Purchase Price, less any amounts paid at the closing for any fractional
share of Pro One Stock to which Stockholder would be entitled, by check
or wire transfer to Stockholder (the "Cash Payment"); or (ii) to retain
the Pro One Stock as "restricted stock" in lieu of the registration of
the Pro One Stock. If Stockholder elects to tender such Certificates
to Buyer, concurrently with Stockholder's receipt of the cash Payment,
the Pro One Stock represented by the Certificates shall be null and void
ab initio or, at Parent's option, redeemed, retired or repurchased. In
either event, Parent shall have no further obligation to register the
Pro One Stock.
13. Waiver. Buyer hereby waives any objection or claim it may have to
Alarm Accounts on the basis that they are not evidenced by written contracts.
14. Increase in Fees. Section 5.18 of the Agreement is hereby amended
in its entirety to provide as follows:
Since January 1, 1997, the company has not increased recurring
monitoring charges or service charges payable by the Company's retail
Subscribers, other than for additions or changes in services or
protection except for two classes of Subscribers whose fees were
increased in 1997 described below:
(i) Persons who became Subscribers from January 1, 1996, through June
1996 whose fees were increased for services provided after June 1, 1997,
whose fees would have otherwise been subject to a general increase which
was effective in October 1996;
(ii) Persons who are Subscribers under the Alarm Net radio monitoring
system whose fees for services were increased on or about June 18,
1997.
15. Registration. In connection with the Registration Statement as
provided in Section 3.2.1 and Exchange of Pro One Stock as provided in Section
3.2.2 of the Agreement, Buyer makes the following representations and
warranties:
a. Parent has been advised that the Securities and Exchange
Commission ("SEC") intends to commence a full review of the Registration
Statement which includes Parent's Form 10-K and applicable other filings of the
Parent with the SEC.
4
56
b. Buyer is not aware of any facts, circumstances or reasons
that Buyer and the Registration Statement are not in compliance in all material
respects with all applicable Federal and securities laws.
c. Buyer is not aware of any facts, circumstances or reasons
why the Registration Statement should not be able to be declared effective on
or before August 31, 1997.
d. The SEC has advised Parent that the SEC does not as a
matter of policy reveal why a registration statement is being reviewed. Buyer
is not aware of any facts, circumstances or reasons why the SEC would desire a
full review of the Registration Statement except it is being done pursuant to
the SEC's routine program of periodic reviews of companies registering new
shares and in light of Parent's filing of several similar registration
statements, all of which have been declared effective by the SEC.
16. Brokers. Section 5.24 of the Agreement is hereby amended in its
entirety to provide as follows:
Buyer has not employed any broker, finder or agent or dealt with anyone
purporting to act in such capacity or agreed to pay any brokerage fee,
finder's fee or commission in connection with the transactions
contemplated by this Agreement, except Xxxxxx X. Xxxxxx (dba) Advent
Financial, for which Stockholder shall be solely responsible for payment
of all brokerage fees, finder's fees or commissions.
IN WITNESS WHEREOF, the parties have executed this Closing Addendum as
of the date first written above.
BUYER: PROTECTION ONE ALARM MONITORING, INC.,
a Delaware corporation
By: /s/ XXXX X. XXXX, III
-------------------------------------------
Xxxx X. Xxxx, III, Executive Vice President
STOCKHOLDER:
By: /s/ XXXXXXX X. XXXX
-------------------------------------------
Xxxxxxx X. Xxxx
5
57
COMPANY: ABLE ALARMS OF ARIZONA, INCORPORATED,
an Arizona corporation
By: /s/ XXXXXXX X. XXXX
--------------------------------
Title: President
6
